The stock market is up about 1,000 points for the month or 3.27%, 2,900 points for the quarter or 10.17%, and 2,200 points for the year or 7.25%. Both numbers are before dividends. Despite the wild fluctuations that we experienced early this year; in the end this year was very normal in terms of profitability. Most of you made money this year, some of you a lot of money. Small cap holdings (the stuff we favor) had a wilder ride and ended up beating both the Dow and S&P for both the quarter and the year.
The topic of this newsletter will be the economy. First, let’s define the economy. It is mentioned often enough that it warrants an exact definition. The economy is the grand total of all goods and service produced and bought/sold within a specified area. When a person talks about the strength or health of the economy, they are making a statement in regards to how much people are buying and producing things. The economy is quite resilient, it has survived multiple wars, natural disasters, etc. It has survived the deaths of multiple industries (for example the stagecoach industry). The reason is that humans are very adept at thriving in a wide plethora of economic environments. Anyone who says that the economy is permanently ruined is just catastrophizing. The economy will be ok, just give it time.
The stock market is a prediction of the health of the future economy. The current economy and the stock market are not directly linked. The connection between the two can be confusing. For example, a booming current economy could cause a booming stock market because people are optimistic about the future. However, a booming current economy could cause a falling stock market because people believe the good times are about to end. The only solid and reliable thing in common between the two is they both go up in the long run. Even if the stock market crashes, in the long run the economy will be fine.
The point of this newsletter is that you should relax. Whatever happens in the news; things will be fine. Every setback is temporary; soon the economy will roar back stronger than ever. A lot of people are worried about permanent damage to the economy. We are not worried about that and are optimistic about the future. The country has survived much worse.
If you have any questions about this topic or any other, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.
Daniel and Eli
As we’re writing these to help our readers, we would be very appreciative of any input in regards to what we should write next. If you want us to write about a particular topic, please contact me. Please contact me if you would like to submit a post to our blog.
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Questions for the comments
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