This Spring our family traveled to Europe. This trip exceeded our expectations in so many ways, my personal favorite sites were the Winston Churchill Museum and the Normandy American Cemetery. Walking through both, I gained a greater appreciation for the dedication, courage, and unwavering commitment the Allied forces had in defeating the Nazis. Through all the chaos, uncertainty, confusion, and destruction, a simple mandate of victory at all costs allowed Allied leaders to achieve their stated objective.
From a capital markets perspective, 2022 may also have been described as chaotic and destructive. With a bear market (S&P 500) decline of 25% between 1/3/22 and 10/12/221, it might have been difficult to recall the benefits of investing. Yet fast forward to June 16, 2023, and we are experiencing another bull rally2 (generally defined as 20% or greater increase preceded by a 20% or greater decline) with the S&P 500 up 24% since Oct 12, 20223. Historically the average bull market lasts 1011 days and has lasted 3.5 times longer than the average bear market (286 days)4. Bull markets average total return of 114% significantly exceeds the bear market average decline of 35%5. If the goal is to increase wealth by investing in the capital markets, one must acknowledge the uncertainty and risks while staying committed to the overall objective.
Earlier this month the May jobs numbers were released. While once again the headline number of 339,000 increased jobs looked promising, the same US Bureau of Labor Statistics (BLS) report reflected an increase of 440,000 unemployed individuals6. How can one report provide such divergence regarding the employment situation? You may recall from a previous Craig’s Corner that two different monthly surveys are conducted (establishment and household survey) and released by the BLS, so these numbers continue to confirm an economy which is a mixed bag. A real-world example which is likely to resonate: if one is buying residential property prices are still generally inflationary, yet if one is purchasing office space/commercial real estate, prices are generally declining. And one more to consider: year-over-year retail sales are up 1.6%, yet adjusting for inflation they are down 2.4% over the same time7. While most economists prefer a goldilocks economy (not too hot or cold), I think more needs to be done to achieve moderate, and sustainable, economic growth.
Flying back over the Atlantic Ocean on our way home, I reflected on our 10 days in Europe. I kept coming back to the Churchill War Room which we visited, and I imagined myself in the chair of one of these decision makers who had so much at stake and a country’s livelihood which depended on them. How did these leaders navigate through some of the darkest days to make their decisions? And then I recalled a quote I had read from Winston Churchill which may have guided them, “Out of intense complexities, intense simplicities emerge”.
1 Bespoke Investment Group, Bespoke Report, June 16, 2023, page2
6 Bureau of Labor Statistics, Employment Situation Summary, https://www.bls.gov/news.release/empsit.nr0.htm
7 Bespoke Investment Group, Bespoke Report, June 16, 2023, page 21