Dear Clients & Friends,
I'm even more delighted than usual to report to you at mid-year on the events of the last six months, and on the further progress toward your most important lifestyle and financial goals. But first, as always, a brief restatement of our key principles that guide our investing approach.
We are long-term, goal-focused, planning-driven investors who own broadly diversified portfolios of enduringly successful companies. As such, we act continuously on our plan, as opposed to reacting spontaneously to current events and media headlines. We're convinced that the economy cannot be consistently forecast, nor the market consistently timed. Therefore, we believe our best chance to capture the full long-term return of equities is to ride out their frequent, sometimes significant, but historically always temporary declines. These will continue to be the bedrock convictions that inform our investment philosophy, as we pursue your most cherished financial goals together.
The first half of the year has certainly given investors plenty to digest—from banking turmoil to the dollar’s reserve status to the debt ceiling debate and so on. However, the big takeaway for 2023 has been the impressive rebound in stocks after last year’s dramatic market selloff.
As the year turned, it seemed as if the economy was in a no-win situation. One of two things was going to happen, 1) the Federal Reserve would tighten credit conditions enough to stamp out inflation, thereby plunging us into recession. Or 2) the Fed would relent, avoiding recession but allowing inflation to burn on. In either case, we were assured that corporate earnings must be poised for significant declines, which meant harm for “the stock market.”
In addition, to the Fed’s lose-lose predicament, the first half of 2023 added three new and potentially dire uncertainties: a wave of bank failures that seemed to threaten the banking system itself, the threat of U.S. sovereign default, and a renewed outbreak of fear surrounding the dollar's status as the world's reserve currency. Yet after enduring the relentless onslaught of crises both real and imagined from mainstream media, the S&P 500 came into the year at 3,840 and closed out the first half of 2023 at 4,450, up 16.88% (including dividends). I'm very tempted to say, “You read that correctly,” and leave you to draw your own conclusions. Instead, I'll just repeat my favorite truism from legendary investor, Peter Lynch: “The real key to making money in stocks is not to get scared out of them.”
In that sense, these past six months represent for me a microcosm for a successful investing career. We did all that can be asked of us: amid almost universal pessimism, we didn't get scared out of our long-term investments-- which can't be emphasized enough. Rather, we stayed focused on our financial goals and on our long-term plan, with confidence that the management teams of the companies we own were positioning our capital with diligence, while they sought out new and potentially greater opportunities amid the adversity.
In summary, everything that happened (or didn't happen) in the first half of 2023 turned out not to matter much. What mattered was that together we chose not to react and instead to work our investment plan. Is it possible that a lifetime of patient, disciplined investment success is just that simple? I believe it can be, but it's certainly not easy.
As always, thank you for being our clients. It is our privilege to serve you.
Nick Enzweiler, CFP® is a registered representative with, and securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Mariner Independent Advisor Network, a registered investment advisor. Mercer Partners Wealth Management and Mariner Independent Advisor Network are separate entities from LPL Financial.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
All data is provided as of July 3, 2023.
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All index data from FactSet.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
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