July 2020 Exerpt

Covid-19 is here in all its fury. Life as we knew it no longer exists and the economy and society struggle to adapt to a new way forward.  Because of this, we find it difficult to reconcile the size and speed of the stock market rebound at the beginning of June with what is likely to be a gradual reopening process and moderate medium-term growth at best.

Liquidity driven market rallies such as this one funded by the Federal Reserve Bank and fiscal stimulus to respond to the Covid pandemic are deceptively attractive and tend to result in excess risk taking.  This one appears to be the same as retail investors buy speculative stocks and more and risky debt is purchased to reach for a higher yield.

During the quarter, the S&P increased 19.9% after declining 20% in the first quarter. Technology stocks played a large part in the comeback.  Meanwhile, the U.S. Treasury Bill returned .03%, down from .56% in the first quarter.  Medium term bonds returned 2.8%.

Your portfolio performed as we had hoped.  The downside was minimized and the larger than normal cash holdings stabilized the portfolio.

On the bright side, one of your stock holdings, Becton, Dixon and Company, is very involved in finding solutions to help on the Covid front.  A few weeks ago, the company received FDA emergency approval for a rapid point-of-care diagnostic test that delivers results in 15 minutes on an easy to use portable instrument that is less costly and requires less training time. Clinical studies performed at more than 20 sites across the U.S. demonstrated that the test is capable of achieving 84% sensitivity.

GOING FORWARD

The Covid-19 pandemic is disrupting the lives of people around the globe and changing consumer behavior in real time.  Employers and individuals are dealing with sea-changes in how and where we work, in family lifestyles including work, school, child-care and care of older family members.  We believe the virus is accelerating several big-picture secular shifts within certain industries that have been developing for years. Industries affected include eCommerce and digital payment systems, cloud computing services, supply chain and manufacturing sources, and clean energy

As in the past, identifying and investing in these accelerating secular shifts within industries is a key part of our investment process and philosophy.  These shifts validate many of our past investment decisions and increase our confidence that the trends we identified are in place and will only get stronger over the next several years.

Next week, I will be emailing you a report that outlines industries experiencing these secular shifts, and directional changes within these industries.

Please be sure to call or email with any questions and comments.

Linda A. Mundy