Happy summer, Marathoners!
With summer now in full swing, I hope you’ve had opportunities to spend time with family and friends, travel, relax, and make the most of the season. Whether your summer has been busy or restful—or a little bit of both—I hope it has been a happy and memorable one so far.
For those of you who look forward to summer sales tax holiday weekends like I do, especially in more generous states like MA (next weekend- Aug 8/9), here’s a guide from Fidelity summarizing which states offer tax holidays, and when.
As I’ve mentioned in previous newsletters, I rarely travel very far during the summer. The season here in the Northeast is simply too short and fleeting to miss. I’ve been enjoying my usual rotation between Boston and NYC, with weekends spent on either Fire Island (Long Island) or Cape Cod—trying to make the most of the sunshine and slower pace whenever possible.
One of the most meaningful parts of my summer has been taking long drives with my grandmother, Sidney, in the 2008 Lexus SC 430 convertible I bought last year (pretty much exclusively for this purpose).
Sidney has always loved convertibles, and since getting around on foot has become more difficult for her, these drives give us a wonderful way to get out and enjoy the season together. We often deliberately pass old homes, neighborhoods, and landmarks she has known throughout her life. Sidney has been living with dementia for quite some time, but familiar places can still spark moments of recognition and connection. With the top down and nowhere in particular to be, these simple summer drives have become very special to both of us.
The U.S. stock market has been on an extraordinary run. Including dividends, the S&P 500 delivered the following total returns over the past three calendar years:
S&P 500 Total Returns
Including reinvested dividends
Year Total Return
2023 26.3%
2024 25.0%
2025 17.9%
Source: S&P Dow Jones Indices LLC, “U.S. Equities Market Attributes,” December 2025. Returns include dividends and are through December 31, 2025.
As I write, despite significant volatility ignited by the Mideast war, the Index is up 9.4% on the year.
Now, without in any way inferring a casualty, do you remember what this extraordinary winning streak grew out of? If not, here’s a reminder:
2022 -25.4%
Yes, from January 3 through October 12, 2022, we had a 25% bear market. And deservedly so. That year saw inflation spike to 9%. The global supply chain was in shambles. The Fed, awakening to inflation far too late, engineered the fastest, sharpest set of interest rate hikes in its hundred-year history. Bond prices cratered; the classic 60% stocks/40% bonds portfolio endured its worst year since (drum roll, please) 1937!
It was (to employ words written and spoken by financial journalism perhaps thousands of times over those ten long months) a ‘bloodbath’ in which there was “nowhere to hide’ and ‘no end in sight.’ Is any of this coming back to you? If so (and even if not) allow me to begin hinting at the major point of this writing. To wit: This is how it has always worked.
More on that conclusion in a moment. But first I’d like to zoom in much closer to recent experience—specifically, the period April 2 through June 5 of this year. On April 2, there came to be a brand new ETF concentrated with laser-like focus on semiconductor stocks—the very hottest segment of this red hot market. The ETF reached $10,000,000,000—that’s ten billion dollars—in assets in just 43 trading days, a new record. (The previous record holder? You guessed it: a Bitcoin ETF.)
On Friday, June 5—spooked by whatever it had chosen to get spooked by—the Nasdaq 100, epicenter of the tech mania, fell nearly 5%. That was nothing: the stock markets of Taiwan and South Korea—which are even more overweight in semiconductors than ours is—went down 7% and 14% respectively. The VIX—Wall Streets semi-official ‘fear gauge’ spiked by 40%, an extremely rare occurrence. All that in just one day.
Question: How is the goal-focused, plan-driven, long-term equity investor to deal with this conundrum? In this one man’s opinion, by pulling our focus back from the tensions of today, and looking at the very clear pattern of the equity market over time. That record is: a number of years of rising prices, followed by a significant but hitherto always temporary decline, followed by a resumption of the long-term advance to new high levels.
The S&P 500 came into the year 1950 at 17 (not a typo). It is currently around 7,300. In the interim there have been by my count—and I count from a euphoric intraday peak to a panic-stricken intraday trough—17 episodes in which the Index declined at least 20%. That’s an average of about one every 4.5 years. The average decline was upwards of 30%--not much above that of 2022, which no one seems to remember.
The compound annual growth rate (dividends reinvested) of the Index from January 1950 through May of this year was 11.6%. A $10,000 investment in the Index in January 1950 (which I concede was not feasible at the time) and left to compound had grown to $44.7 million on May 31 of this year (also, not a typo).
It should be clear to you that the advance in share values (and reinvested dividends) has dwarfed the frequent, sometimes significant, but hitherto always temporary drawdowns, both in strength and duration. And since neither the onset nor the bottom of a market decline can ever be consistently timed, we long-term investors are committed to riding them out, in quest of the premium returns.
Now, just when you might have despaired that I would ever come to this point of this newsletter’s title, it’s simply this:
With the serial explosions of alternating speculative frenzy and stark terror currently going on all around us, perhaps the most rational thing the long-term equity investor might wish for is another 2022: a nice, long, panic-driven cleansing of the speculative excesses. After which—if history is any guide, and it’s the only guide we have—the normal advance of mainstream equity values and dividends that has been in effect since 1950 (and far longer) can resume on firmer footing.
As Clemenza memorably says to Michael Corleone: ‘These things gotta happen every five years or so, ten years. Helps to get rid of the bad blood.’ To long-term investors who believe a significant market correction is inevitable at some point, one can only say, "Yes—and, in my opinion, the sooner the better."
There has rarely been a more eventful 6-month period than the one just past. A major war, severe disruption in energy prices, inflation, the sudden threat of higher rather than lower interest rates, equity valuations near historic highs, extreme concentration in the broad market averages, the total collapse of Bitcoin and the precious metals, and by far the biggest initial public offering (IPO) in history—around spacecraft, of all things. Have I left anything out?!
So how (on earth!) would one go about making rational investment policy out of this maelstrom? The answer—as I believe will be intuitive to all of our clients—is that one doesn’t, because one can’t. It’s at such times that we can stand back and almost celebrate for chaos, for one compelling reason: it has nothing to do with us.
For each client we have goals, a plan, and a portfolio as closely aligned with both as we know how to make it.
We who see ourselves as long-term owners of consistently superior businesses as distinctly opposed to traders in ‘the stock market’ can only marvel at the extent to which the earnings of those companies have soared, and are continuing to do so. Moreover, their profit margins are at all-time highs, and they continue to raise dividends, even as they invest in even more innovation and the growth of their businesses.
So yes, it’s possible that a hugely emotion-driven equity market like this one could significantly and perhaps even savagely correct at any moment. It can, and if history is any guide, it will—probably when the consensus is least expecting it. And because we know that our inability to time it is total, we will plan to ride it out, as we always have.
Withdrawing from the market may feel like protecting long-term capital (ownership in businesses), but history suggests that attempting to sidestep market declines can expose investors to the risk that markets recover—and sometimes race to new highs—without them. Markets have historically rebounded from periods of decline, often quickly and unexpectedly, leaving those who exited the market with the difficult decision of when, or whether, to get back in. Watching the market recover without you can become one of the most painful—and enduring—regrets.
At some inevitable point in the future, negative headlines will again trigger fear among investors—particularly the most speculative—and many will rush to sell, temporarily pushing the market down by perhaps 20% or more. When that happens, it is worth asking: Have 500 of America’s largest and most successful companies truly lost one-fifth of their long-term value as operating businesses?
Or is it more likely that market prices have temporarily fallen much faster than the underlying value of those companies? Every decline feels different while we are living through it, and each one arrives with a compelling explanation for why ‘this time’ may be worse. Yet history has repeatedly shown that temporary declines in market value do not necessarily represent permanent losses in business value.
I’m here to respond to any and all questions and concerns you may have. Thank you for being my clients. It is a privilege, and truly, a joy, to serve you.
Keep having fun,
Charlie
PS. Here are some potentially insightful articles I've compiled over the last few weeks:
• 8 Things to Check in Your Homeowners Insurance
• Can the Stock Market Keep Reaching All-Time Highs?
• Retirement Checklist for Every Stage
• 5 Ways the “Die With Zero” Strategy Can Change Your Approach to Saving and Spending
• How to Build Wealth That Lasts Beyond You—and Avoid the “Expertise Trap”
• What to Know About Trump Accounts
• How Asset Location Can Boost After-Tax Returns
• What Is a Backdoor Roth IRA? Income Limits, Taxes, and Rules
• Tax-Efficient Gifting With Appreciated Assets
• Why a Large Stock Position Is Risky—and What to Do About It
• 2026 Gift and Estate Tax Changes: New Opportunities for Wealth Transfer
This newsletter is provided for informational and educational purposes only and is not intended to constitute personalized investment advice or a recommendation to buy, sell, or hold any security or adopt any investment strategy. Certain statements reflect the author's opinions, interpretations, and market observations as of the publication date and should not be construed as statements of fact, guarantees of future performance, or predictions of future market events. Such views are subject to change without notice.
References to market performance, economic conditions, or historical events are provided for illustrative purposes only. Past performance is not indicative of future results, and historical trends are not guarantees of future market performance. All investing involves risk, including the possible loss of principal. Investment decisions should be made based on an individual's financial circumstances, investment objectives, risk tolerance, and time horizon.