By: Chad Meyer, CFA

Greetings from Tufton Capital, where the summer heat is finally abating, the leaves outside our office are quietly changing, and—in keeping with Baltimore business etiquette—Fridays around our halls are taking on a distinctly purple hue.

Of course, encouraging though the view from our window may be, rest assured that your team of investment professionals remains focused on an entirely different landscape. As this newsletter goes to press, the country’s major news outlets are allocating equal front-page real estate to interest rate predictions (when will the Fed wrap these hikes up?), to campaign efforts for a possible Biden vs. Trump rematch and to a foreign policy landscape with uncertainty and sadness spanning from the Middle East to Ukraine. Blessing or curse, there is no denying that these are “interesting times.”

So, what do we make of it all? First, and most concretely, come the numbers. The stock market turned in losses in the third quarter of 2023, with the S&P 500, Dow Jones and Nasdaq all declining by roughly 3%. 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 4% and 9%, 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 thanks to Artificial Intelligence (AI) fever, by the close of September value stocks showed signs of perhaps becoming more en vogue. From health care to financials, the data indicates a newfound conservatism gripping the marketplace.

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 corporate financial results are actually doing just fine. In the last week alone, a string of marquee companies, including J.P. Morgan (JPM), Procter & Gamble (PG) and Lockheed Martin (LMT), has 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 approach—value investing. 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 almost three decades protecting our clients’ interests through the steadfast pursuit of great businesses built atop sturdy models sold at fair prices. And in times like these, that’s a blessing indeed!