By: Chad Meyer, CFA

In a market that can be difficult to anticipate, there’s a simple pleasure to seeing spring arrive right on time. And if the April weather outside of our office is any indication, it would seem that May is planning to make a colorful entrance, indeed.

As encouraging as the view from our window may be, rest assured that your team of investment professionals remains focused on an entirely different landscape. In the first three months of 2023, as the Fed continued its rate hikes and forecasters fretted over policy, the S&P 500 rose by roughly 7%, while the Dow Jones Industrial Average eked out a slight gain. Not to be outdone, the NASDAQ climbed a whopping 17%—its best quarterly gain since the fourth quarter of 2020. Needless to say, this is all welcome news. But as investors consider their next move, the questions are inescapable. Are the good times on solid footing, or should one expect the market to change with the weather?

To some, these gains signal clear skies—and good times—ahead. As first quarter earnings continue to roll in, the results are largely beating profit forecasts to clear a bar that was set particularly low. Some of the big banks, including JP Morgan (JPM) and Bank of America (BAC), are reporting that strength in expanding net interest margins is outweighing any weaknesses associated with a tighter lending environment (thank you, Silicon Valley and Signature Banks!). As of this writing, 20% of S&P 500 companies have reported Q1 earnings, with 80% delivering better-than-expected results. With this recent optimism across the board, many analysts, perhaps syncing their projections to this prospect of consensus-beating earnings, expect a return to low single-digit corporate profit growth in the back half of the year.

But as the market begins to show some renewed signs of life after a challenging 2022, some participants are less inclined to believe that hope and growth spring eternal. Nor are their fears without warrant, and the case for treading thoughtfully in the days ahead remains strong. Given the relatively low level of volatility that attended to this quarter’s growth, we believe that large swaths of investment capital remain stuck on the sidelines, still waiting for the dust to settle around American policy. As both physicists and economists will attest, the more pent-up energy a system contains, the more cause to handle it with care.

And that is precisely how your Tufton Capital advisors are handling the trust you have placed in us—with the utmost of care. Since 1995, our firm has favored principled investing over economic forecasting, with the intent of protecting and growing client capital regardless of broader market conditions. Historically, we believe this “all-weather” approach has kept our clients in good stead. As the May flowers begin to bloom in this period of prolonged uncertainty, we expect it to do more of the same.

In the pages ahead, you’ll find an overview of our current market thoughts, including a review of an equity investment in the semiconductor space that we continue to believe offers meaningful long-term opportunity. Should you wish to discuss these or any other matters related to your portfolio, we encourage you to pick up the phone and give us a call. We remain at your service and look forward to providing you, our valued client, with the level of attention, insight and performance you have come to expect—no matter what comes next around the bend.