By Scott Murphy
The global economy dictates that successful companies compete daily for their own survival in a corporate sense and also in the minds of their customers. Wall Street is only happy to oblige by coming up with innovative and often replicated strategies from their collective corporate toolboxes. In some ways, you could view this symbiosis as the world’s greatest financial construction firm. They build it up to break it down, often repeating the process as decades pass and memories of the individual participants fade.
By Randy McMenamin, CFA
The five most dangerous words to a portfolio manager are “This time it is different”.
Inflation is a hidden tax which only stays hidden for so long. When inflation rears its ugly head and is visible to consumers, business people and politicians, there is a problem.
What causes inflation? Today’s inflation is caused by too much money chasing too few goods and services. The annualized CPI (Consumer Price Index) for December 2021 was up 7% from a year earlier – the fastest increase since June 1982. This time was different because very strong money supply growth and generous government stimulus gave rise to this high level of inflation.
With class officially back in session, it is perhaps fitting to greet fall with the words of an author familiar to most every American student. “October,” wrote Mark Twain, “is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”
By Eric Schopf
The Standard & Poor’s 500 carried strong momentum from the first half of the year into the third quarter. After setting fifteen new closing highs during the first quarter and nineteen during the second, twenty new all-time highs were recorded in the third quarter. A pullback of over 5% during the final weeks of September, however, all but erased these gains. For the quarter, the S&P 500 registered a total return of just 0.58%, but this year-to-date total return is still an impressive 15.92%. Interest rates moved higher during the quarter, with yields on the ten-year United States Treasury bond rising from 1.45% to 1.53%.
By Ted Hart
Cisco Systems (Ticker: CSCO) was once a tech darling. During the Tech Bubble of the late 1990s, Cisco quickly climbed to become the most valuable company in the world. As the market leader in internet routers and network switches, investors believed that the company “that powered the internet” had growth as far as the eye could see. Shortly after the millennium, and as the economy went into a recession, the growth of the internet faltered and left Cisco’s growth prospects dim. Since then, the company has increased sales at about 5% per year. However, during the same period, the stock has languished due to its lackluster growth relative to its technology peers. All the while, Cisco kept one of the cleanest balance sheets in the industry and rewarded shareholders with above-average dividend growth. And next, hybrid work (a mix of working from home and in the office) landed right in their laps! Cisco may not regain the crown as the world’s most valuable company, but their prospects are stronger than they have been in over twenty years.
By Barb Rishel
Why are there so many trucks on the road and why are the store shelves so empty? Why is it taking so long to get my stuff? And why does everything seem more expensive?
These are questions we find ourselves asking almost every day. The U.S. economy is strong, with gross domestic product (GDP) up 12.2% in 2Q21. People are going back into the office (more traffic!), and the holidays are fast approaching. So why are there so many shortages?
With the fireworks long faded and the bunting stowed away, the high holiday of summer has come and gone. But if the party is over, a question now looms large. Who’s going to tell that to the American stock market?
For starters, let me once again begin with what matters most – your family’s health. In these humbling and unprecedented times, one cannot help but be reminded of life’s true priorities. As vaccines are widely available and a true “reopening” seems to be here, it is my sincere hope that this letter finds you and your loved ones in good stead.
By Eric Schopf
Investors were rewarded once again in the second quarter. The Standard & Poor’s 500 provided a total return of 8.55%, bringing the year-to-date return to 15.25%. The S&P 500 is now 90% higher than the pandemic low point of March 20, 2020 and 30% higher than the February 14, 2020 pre-pandemic high. The reward for risk has been substantial. Fixed income investors were not left out as yields on ten-year United States Treasury bonds fell to 1.45% from 1.74% during the quarter.
By Scott Murphy
Founded in 1994 by Jeff Bezos, Amazon.com is the world’s largest internet department store, and also one of the largest companies based on revenue and stock market capitalization. Originally offering only books through its website, Amazon has expanded both the breadth of products sold through its ecommerce platform and the absolute number of services offered. The products offered range from consumer staple products to Amazon-manufactured electronic devices such as their Kindle and Echo. More than a retailer of consumer goods and electronic items, Amazon has purchased companies including Whole Foods, Ring and Audible as bolt-on businesses to take full advantage of its retail reach and to add to its overall business portfolio. Ultimately, scale and efficiency are what drive Amazon in its pursuit of building out its ecommerce platform to both sell directly to consumers and to serve as the middleman between customers and third-party sellers.
By Rick Rubin
In Tufton’s Winter 2020 newsletter, we provided an overview of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law in late 2019. The SECURE Act allows more individuals to access workplace retirement plans and to increase retirement savings. Many of the provisions became effective on January 1, 2020. But in response to the Covid-19 pandemic in the U.S., new legislation (the CARES Act) was enacted in March 2020 that delayed many of the SECURE Act’s provisions for 2020.
In a market that can be difficult to anticipate, there’s a simple pleasure in seeing spring arrive right on time. And if the April showers outside our office are any indication, it would seem that May is planning to make a colorful entrance, indeed.
Let me once again begin with what matters most – your family’s health. In these humbling and unprecedented times, one cannot help but be reminded of life’s true priorities. As vaccines become widely available and a true “reopening” is around the corner, it is my sincere hope that this letter finds you and your loved ones in good stead. (more…)
By Eric Schopf
The first quarter of 2021 gave investors a little bit of everything. We saw a second impeachment of Donald Trump, the inauguration of Joe Biden, two more shots of fiscal stimulus, multiple Covid-19 vaccines, the rise of retail investors and meme stocks, unseasonable weather patterns and the collapse of a hedge fund masquerading as a family investment office. Through it all, the stock market maintained a bullish stance with the Standard & Poor’s 500 delivering a total return of 6.2%. The improving outlook for the economy was confirmed by the bond market as interest rates rose sharply. The yield on the 10-Year U.S. Treasury note spiked to 1.74% from 0.92% at year end.
By Eric Schopf
Wells Fargo & Co. is a diversified, community-based financial services company. It offers banking, insurance, investments, mortgages and consumer and commercial finance. WFC operates through three segments: Community Banking, Wholesale Banking and Wealth & Investment Management. The Community Banking segment offers diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards and automobile, student and small business lending. The Wholesale Banking segment provides financial solutions to businesses across the United States and globally. The Wealth & Investment Management segment includes personalized wealth management and investment and retirement products and services. The company was founded in 1852 and is headquartered in San Francisco, CA. Today, WFC operates over 5,900 branches across thirty-nine states and the District of Columbia. Wells Fargo is one of the largest banks in the country with $1.9 trillion in assets.
By Barbara Rishel
On March 31, 2021, President Biden released details for a proposed American Jobs Plan – a $2.7 trillion package aimed at addressing a range of issues, including transportation and other infrastructure, climate change, caregiving and housing. If approved by the Congress, the plan would represent one of the largest investments in the nation’s infrastructure in history, although the scope of the proposal goes beyond what is traditionally thought of as “infrastructure”. As a means of fully offsetting the cost of the package, the Administration has proposed increasing the corporate tax rate from 21% to 28%.
Greetings from Tufton Capital, where the tinsel has been packed away, the winter weather has formally arrived, and your team of investment professionals has been busy closing the books on a year that will never be forgotten. (more…)
