The first day of Autumn is this Saturday. Although our afternoons have been remaining stubbornly hotter than most probably want, the mornings have been refreshingly cool. I always look forward to this time of year. I enjoy the coloring of the leaves of course, but I particularly like noticing how the changing schedule of the sun affects the world, both how it looks and how people adapt their own schedules to the difference.
I will keep this letter short, but I wanted to give you a quick update on what I’ve been seeing in the stock and bond marketplaces. The changing season also brings on new activity in those marketplaces. Trading slows down in the summertime, and once vacations are finished and school is back in, trading increases. September has historically been the “worst” month of the year for performance, leading to an actual naming of the observance, which is the September Effect. The observed loss is minor, on average less than 1%, and is most likely another case of a self-fulfilling prophecy. Whatever the actual reason, the September Effect could add to any other angst currently in the air.
The talk of the markets today mostly involves worry about what the Federal Reserve will do next, what effects the war in Ukraine will continue to have on the rest of the world, what effects current political brinkmanship may add to market uncertainty, and finally, concerns about the upcoming election. This list has not changed in months. The biggest noticeable difference is that there is less talk about inflation and recession. Inflation remains higher than comfortable, especially at the grocery store, and now again at the fuel pumps.
When you add all of that up, not much has changed in quite some time, and there are no new threats to worry about. Worrying about old threats is easier than worrying about new ones, but the next new worry, as history would teach us, will be right around the corner. Overall, this is a hard environment to generate profits in, both for businesses and individuals. I believe this will have the biggest effect on companies who have borrowed too much money, and their respective stocks, which are overvalued. We will continue to search for bargains but will do so with conservative diligence. Patience is, and will continue to be, a deciding factor for market returns during the mid-term future.
As always, we are here if you need us. I hope you are all able to find time in the business of life to enjoy the coloring leaves and changing light and shadows of the Autumn season.
Kendall J. Anderson, CFA, Founder
Justin T. Anderson, President