I have been very fortunate in the last few weeks and I have a lot to be grateful for. Gratitude starts with the simplest step of appreciating our being present in our life. My good mood comes from recently celebrating with family and friends the marriage of my second daughter, Erin. Becoming a parent was probably the most exciting time of my life. I have been blessed three times, and each child has gifted me continuously with so much joy. This weekend, I will celebrate Father’s Day, in two weeks I will celebrate 33 years of marriage, Independence Day and my 60th birthday. These comments are the result of trying to recognize the good in life every day. I believe we all can celebrate small and large victories, with the habit of stopping and taking a moment to reflect.
I also believe that we need to understand gratitude on a professional and financial level. I am fortunate to have Travis as my partner because he brings a very calming effect to our strategy discussions. We work in the greatest economy in the world. The U.S.A. has many of the greatest companies, leading the world with exciting technologies in computing, communication and health care. These companies operate thanks to a phenomenal education, legal and financial support system. Our job is made difficult not by our inability to find companies, but because we have too many great ones to choose from.
We are fortunate to have Morningstar as a partner to help us evaluate thousands of securities worldwide while also providing insights on economic, tax and planning ideas that benefit our clients. Using their data and our process for evaluating quality and value, we have acquired many great companies and delivered solid results for our clients.
The markets have been driven by momentum, with ten large companies leading the way. Among those, we have held Apple, Google, Amazon, Nvidia, Microsoft and Facebook in various portfolios. There are several clouds sitting on the horizon with the potential to rain on our parade. There are several macroeconomic factors summarized by the LEI (Leading Economic Indicators) show an economy which is slowing. The increase of interest rates by almost 5% has affected the purchase of goods and services. The higher price of food and energy is causing consumers to think more about what to purchase and to adjust behavior. These challenges are a natural part of the economy and we are watching closely so that the client portfolios will be well prepared. The fixed income portion of our clients’ portfolios is built to take advantage of higher rates and we are preparing for a pivot. As we approach the end of the Fed raising rates, then we may consider becoming a little more aggressive by owning longer dated bonds.
I hope all of us can start our summers with positive feelings after a challenging first half for the economy. We continue our vigilance, and we look forward to meeting and addressing challenges which may occur during the second half. We welcome your comments and we stand ready to help answer any questions. As always, we appreciate your continued trust.
~ Steve Davenport, CFA