We are and you are long-term, goal-focused, plan-driven equity investors. We believe that lifetime investment success comes from acting continuously on our plan. Likewise, we believe substandard returns, and even lifetime investment failure, come from reacting to current events. The unforeseen and indeed unforeseeable economic, market, political and geopolitical chaos of the three years since the onset of the pandemic demonstrates conclusively that the economy can never be consistently forecast nor the market consistently timed. Therefore we believe that the most reliable way to capture the full return of equities is to ride out their frequent but historically always temporary declines. These will continue to be the bedrock convictions that inform our investment policy, as we pursue your most important financial goals together.
- The central drama of last year—and, it seems likely, of the coming year—was the Federal Reserve’s belated but very aggressive efforts to bring inflation under control.
- The burning question of the hour seems to be whether and to what extent the Fed, in its inflation-fighting zeal, might tip the economy into recession at some point—if it hasn’t already done so. Over the coming year, the way this plays out may determine the near-term trend of equity prices. Our position continues to be that this outcome is simply unknowable, and that one cannot make rational investment policy out of an unknowable.
- If anything, this tends to validate our core investment strategy over these three years, which—simply stated—has been: stand fast, tune out the noise and continue to work your long-term plan. Needless to say, that continues to be our recommendation, and in the strongest possible terms.
- That said, we continue to believe strongly that whatever it takes to put out the inflationary fire will be well worth it. Inflation is a cancer that affects everyone in our society; if recession proves to be the painful chemotherapy required to destroy that cancer, then so be it.
- Although this may be hard to remember every time the market gyrates (and financial journalism shrieks) over some meaningless monthly economic datum or other, we are not investing in the macroeconomy. Our portfolios largely consist of the ownership of enduringly successful companies—businesses that are even now refining their strategies opportunistically to meet the needs and wants of an eight billion person world.
- As we always say—but can never say enough—thank you for being our clients. It is a genuine privilege to serve you.
Past performance is no guarantee of future results. Please note that individual situations can vary. All investing involves risk including loss of principal. No strategy assures success or protects against loss. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Stock investing includes risks, including fluctuating prices and loss of principal. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.