Adapted from my letter sent to my private wealth management clients on May 3, 2023.

Click the image above to view the scene from the film.

Tu’ppence

noun. tup·pence ˈtə-pən(t)s.
variant of twopence.: the sum of two pennies.
Note: Twopence is usually used of two British pennies.
~Merriam Webster

Imagine my surprise when I awakened from one of my treasured, but always too short, weekend dad couch naps by the loud ruckus from a run-on Fidelity Fiduciary Bank!

Our son was in the same room watching “Mary Poppins,” which features a scene with a run on the fictitious bank. I’d never watched this great 1964 classic, but the message hit close to home. It had only been a week or so earlier that the financial world, and anyone who cared about the safety of their savings, was transfixed by the depositor run on and the rapid collapse and takeover of several banks—the signature financial event of 2023’s first quarter.

After being lectured in song by the Fidelity Fiduciary Bank management (actually, a great ditty on the power of savings and investing; I included the lyrics at the bottom of this letter for your pleasure), little Michael Banks (one of the children in “Mary Poppins”) loudly demands his “tu’ppence” (two pennies) back, sparking the bank panic.

And Yet, Markets Rise

While pressure on some banks is being viewed as a somewhat unexpected result of the Federal Reserve’s inflation-fighting interest rate hikes, economic slowdown will be no surprise. Despite continued banking troubles, and many commentators anticipating a recessionary environment in late 2023, stocks have had a strong start to the year. After 2022’s market shakeout, dividend yields on select stocks are appealing (see my related webinar discussion with Thornburg linked below), and the last time we had this array of attractive interest-paying securities, I was still picking up movies at Blockbuster.

*If you are holding excess cash, let’s talk! Brokered CDs, “purchased” money market funds, and the broad bond market are worth evaluating to optimize your interest-bearing holdings.

Portfolio Statements & DFA Reports

A detailed breakdown of the 2023 Q1 market returns provided by Dimensional Fund Advisors and your personal portfolio reports are in your Cahill Client Portal. Click here to access these reports.

Fun Fact: 1964 vs. 2023

In 1964, when Mary Poppins was released, the S&P 500 Index started the year at 76.45. At the time of this writing, the S&P stands at 4,169.48. One dollar invested in the market at the beginning of 1964 and left invested, would have grown to $289.15!

Note how the graph, “$1 in S&P 500, 1964-2023” looks like a relatively long approach hike, some foothills, and then, thanks to compounding, a sharp ascent to the money mountain top. This is the long-term retrospective view.

In contrast, look at the graph below, “S&P 500 Monthly Returns, 1964-2023.” This graph shows returns of the same market index, over the same time period, but in short-term increments. It looks like a chaotic mix of peaks and valleys—making it difficult to see any sign of upward progress. This highlights the importance maintaining a long-term and multi-year perspective, while simultaneously, ignoring the day-to-day or month-to-month market volatility and media noise! (If you need extra encouragement for ignoring the media, I published my thoughts about it on my blog.)

My Umbrella Conclusion

Mary Poppins floats into the Banks’ life with her umbrella on a shift in the wind. Having helped the Banks’ family relationships and done a variety of magical nannying tasks—along with some wonderful singing—the winds change, and Mary Poppins floats away again with her umbrella.

The economic and market winds may bring stormy weather in 2023, no one knows for certain what will happen in the future, that’s why we advise to metaphorically “always carry an umbrella”—even when the market outlook is sunny.

What we do know is that over time, the prevailing winds in the market have moved upward and have carried disciplined long-term investors to new heights, despite the occasional squall, to which I say, "Supercalifragilisticexpialidocious!"[1]

As always, we are honored that you have chosen us to serve you and your family on your financial journey. If you have any questions, please let me know.

Thank you,

Scott

[1] In this context, I am of course referring to Helen Herman’s 1931 Syracuse University Daily Orange, definition that the word "implies all that is grand, great, glorious, splendid, superb, wonderful,” rather than the “a word to say when you don’t know what to say” definition. (Source: Wikipedia)

In Case You Missed It

I discussed the March bank run on my blog: “The Great Bank Panic of ‘23”. I also publish my “Money Matters” radio segments and other financial writing that I hope is valuable to my clients.

You can find my blog here ScottOeth.com.

Recorded Webinars

We frequently host webinars featuring topics relevant to our clients’ needs and interests. You can watch our recent webinars on demand:

Secure 2.0. Our wealth strategy team covered the many new tax law changes and planning opportunities in the recent Secure 2.0 tax bill. Learn more about these changes, as well as how we evaluate individual planning opportunities around this bill over the course of the year.
Margin of Safety. Jay Lisowski, CFA, SVP at First Eagle Investments joined me to discuss First Eagle’s investment approach, including how they attempt to deliver diversification from the masses, protect value with their “margin of safety” approach, and their view of the markets.
Top Tax Planning Strategies. Our wealth strategy team discussed top year-end tax planning strategies. We’ll be considering many of these same strategies for clients as we move through 2023.
Road to Retirement. Andrew Rice, Director of Advisor Solutions at Thornburg Investments, joined me to discuss Thornburg’s research into the “Endowment Spending Policy” and the role of stock dividends.
Real Asset Investing. What assets can we buy to hedge against rising prices? How do we add diversification in portfolios from stock and bond investments? With hybrid work and rising interest rates putting pressure on commercial real estate, what is the outlook for this asset class? How do we add quality real estate exposure? I hosted a conversation with Michelle Butler, SVP and Portfolio Specialist of Cohen & Steers to discuss these timely topics and more. Cohen & Steers has long been noted as a leader in real estate investing, and their firm has deep expertise in global infrastructure investing.

Future Webinars

Berkshire Hathaway Annual Shareholders Meeting. Saturday, May 6 @ 8:45 a.m. CT. Chairman and CEO Warren Buffett and Vice Chairman Charlie Munger preside over the Berkshire Hathaway annual meeting, nicknamed the “Woodstock for Capitalists.” The Omaha, Nebraska, event gives shareholders a chance to hear the legendary pair discuss investing, their economic outlook and life.
https://www.cnbc.com/brklive/
A Conversation with David Booth and Eugene F. Fama. Friday, May 12 @ 12:00 p.m. CT. The Museum of American Finance is hosting a discussion with David Booth, chairman of DFA, and Eugene Fama, Nobel laureate in economic sciences. Renown thought leaders in the financial field, this free webinar will undoubtedly provide an insightful look into the current economic climate.
Register for free here.
College Savings Strategies. Wednesday, June 7 @ 12:00 p.m. Our wealth strategy team will be tackling college savings strategies. Contact Anna to register.
Direct Custom Indexing. Wednesday, June 14 @ 12:00 p.m. Merrie Zhang, Vice President, Client Portfolio Management at Goldman Sachs, will be joining me to discuss direct indexing. Contact Anna to register.
Economic & Market Update. Thursday, July 20 @ 12:00 p.m. Asawari Sathe, Senior Economist and Ryan Zalla, Investment Strategist from Vanguard will join me to discuss the current economic climate and strategic approaches to investments based on individual goals. Contact Anna to register.