It is our pleasure to report to you on the progress of your financial plan during the rather turbulent and eventful first six months of this year.
As always, let us first take a moment to remind ourselves of a handful of timeless truths about successful wealth management — principles which guide our work together toward your goals. Then we will look at some more current observations.
Timeless principles
We are goal-focused, plan-driven, long-term equity investors. Your portfolio is constructed from, and driven by, your most important lifetime financial goals — not by any short-term view of the economy or the markets.
We do not believe the economy can be consistently forecast, or that the markets can be consistently timed. Nor do we believe it is possible to gain an advantage by moving in and out of the equity market in reaction to current conditions.
We therefore believe that the most effective way to capture the full long-term returns of equities is by remaining fully invested at all times.
We are prepared to ride out the equity market’s frequent, sometimes significant but historically always temporary declines. Even during these periods, reinvested dividends are buying more shares at lower prices, and the power of compounding continues to work for your long-term benefit.
The first half of 2025
If you had looked at the equity market on the first trading day of January and then not again until the end of June, you could be forgiven for concluding that not much — if anything — had happened. In reality, quite a lot happened, though at least so far it has had no lasting effect.
The S&P 500 Index reached a new all-time high on 19 February. By 8 April, it had closed 18.9% lower. Even that number does not quite capture the degree of outright panic — and there really is no other word for it — that swept through markets following President Trump’s 2 April announcement of a sharply increased tariff programme.
That panic ended almost as abruptly when, a week later, Mr Trump announced a 90-day postponement of most of the new tariffs. In the seven or so weeks since then — supported by ongoing economic resilience and signs that inflation may be moderating — the Index has returned to roughly its early January levels.
From a UK investor’s perspective, this episode is a reminder that global equity markets — whether we measure them in the United States, here in the UK, or elsewhere — will from time to time be driven sharply up or down by political headlines, economic speculation, and sudden swings in sentiment. And yet, over the medium to long term, these movements tend to be temporary interruptions to the long-term upward trend.
What we can take from this
As is virtually always the case, the optimal course of action for long-term investors during such an episode was to continue working your plan and to remain fully invested. That is what we encouraged you to do in April, and that continues to be our recommendation today.
Please do not mistake this for an economic or market outlook for the rest of the year. We had no such forecast on 1 January, and we have none now. Our only forecast is that the excellent companies we own will, over time, go on innovating, increasing their earnings, raising their dividends, and thereby supporting your long-term financial goals.
Panic does not often seize the investing public as suddenly as it did in the first week of April, nor does it often fade as suddenly as it did the following week. Still, this episode can and should serve as a kind of tutorial in successful investing.
The lesson is this: investors succeed over time by continuing to work their plan regardless of the “crisis of the day.” Others fail by reacting to negative events and selling even the highest-quality investments at panic prices. We believe this is always the fundamental choice in investing, and our mission — which we greatly value — is to help you continue to choose wisely.
We welcome your thoughts, comments, and questions. Thank you, as always, for being our clients. It is a privilege to serve you and to be alongside you on your journey toward your goals.
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