Second Quarter, FY2018 newsletter
In the quarter that ended on June 30, the stock market exhibited a classic see-saw pattern, as investors reacted positively and negatively to the news from both Washington and abroad. The delivery of news was omnipresent, with tweets from the President as early as 4am on many mornings.
As a consequence, investors tended to focus their attention on the day’s often troubling headlines, or what we call the disaster du jour, while ignoring the impressive gains of the past decade. While it is easy to get caught up in and become discouraged by what can often be described as the inflammatory rhetoric of the day, we deliberately focus our attention on the long term, and we employ the very same approach when reviewing the past.
At the quarter’s close, the Dow Jones Industrial Average stood at 24,271. It is easy to forget that a year earlier on this date, the Dow closed at 21,287 or almost 3,000 points lower than the close on June 30, 2018 as the market recorded another trailing twelve months of double digit gains. Longer term, the market has notched double digit gains in seven of the past nine calendar years - and the other two years were also positive. Accordingly, we maintain that the glass is still (far more than) half full.
History suggests that there will be another recession, not yet visible on the horizon. The economic cycle has not been repealed, nor has the stock market cycle. When that time comes, we want you to remember that we have great confidence in the management teams of the companies whose stock you own, most of whom managed superbly through the last recession. They are seasoned and very capable of managing through the next economic downdraft, whenever it appears.
One other point: high quality dividend-paying stocks tend to fall far less in a down market, as the dividend provides an income stream that enables the shareholders to hold on and ride it through.
Consequently, we remain confident that a portfolio of high quality stocks with a consistently growing dividend is an all-weather approach for our clients.
As always, we welcome your questions and comments.