by Chad Meyer, CFA

“May you live in interesting times.” Purportedly Chinese in origin, this cryptic maxim has been alternately interpreted as both a blessing and a curse. In that regard, it should strike a familiar note with American investors. As this newsletter goes to press, the country’s major news outlets are allocating equal front-page real estate to impeachment proceedings against a sitting president, to campaign efforts for the next one and to a foreign policy landscape with uncertainty spanning from Great Britain to Turkey. Blessing or curse, there is no denying these “interesting times.”

So what do we make of it all? First, and most concretely, come the numbers. The stock market turned in modest gains in the third quarter of 2019, with the S&P 500, Dow Jones and Nasdaq all rising by roughly 1%. In the immediate sense, this figure represents a dramatic pumping of the proverbial brakes. From April through June of this year, for instance, the Dow and S&P notched growth nearer to 3% and 4%, respectively. Rewind even further to the heady days of the first quarter, when the Nasdaq rose a staggering 17%, and the contrast becomes even clearer. By all appearances, the animal spirits of yesterday have exited stage left, leaving an overriding feeling of caution in their stead.

This sentiment is borne out in the fine print of the past quarter’s performance. Unlike the first half of the year, in which richly-valued technology firms overwhelmingly drove the market forward, by the close of September the value stock was emphatically en vogue. From REITs (up over 7%) to Utilities (up over 9%), the data strongly indicates a newfound conservatism gripping the marketplace.

As is usually the case, plausible and competing explanations for this sea change abound. On Wall Street, there’s the flagging IPO market, where shifting opinions of former high flyers like Uber, Lyft and WeWork (the latter of which postponed its public market debut), have prompted analysts to take a second look at “disruptive” Silicon Valley bookkeeping. (In a recent research note to clients, Goldman Sachs characterized this year’s IPO crop as the worst in over two decades.) In Washington, there’s President Trump’s unprecedented antagonism towards the Fed, to say nothing of his ever-itchy Twitter finger as well as ongoing impeachment woes. Globally, the International Monetary Fund has recently warned of a “synchronized slowdown,” attributing 0.8% of this year’s projected global GDP haircut to U.S.-China trade anxiety alone.

At the current time, you may be forgiven for your confusion regarding the blessing-or-curse fault line. Consider the following: frightful financial tea leaves notwithstanding, today’s market is actually doing just fine. In the last week alone, a string of marquee companies, including Johnson & Johnson, UnitedHealth, and Bank of America Merrill Lynch, have upended gloomy analyst forecasts with stronger than expected earnings. As CNBC pithily put it: “Earnings season is off to a bullish start.” Better still, and as previously noted, is the fact that the new focus of widespread investor attention coincides with the longstanding core of our investment approach – value. As the “interesting” days roll on, take pleasure in the fact that what the masses now seek is that which you already have. Here at Tufton Capital, we’ve spent over two decades protecting our clients’ interests through the steadfast pursuit of great businesses built atop sturdy models sold at a fair price. And in times like these, that’s a blessing indeed!