Matthew Young, President and CEO, writes his clients letters keeping them abreast of changes that can affect the portfolios with Richard C. Young & Co., Ltd. You can sample some of these letters below.
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My dad has written for decades that the two most important words in investing are compound interest. Over time, the power of compounding is profound. One of Dad’s oldest friends in the investment business, Dave Hammer, recently relayed a story about the power of compounding that I would like to share with you.
The Wall Street Journal recently profiled the former CEO of the Cato Institute, John A. Allison, who was rumored to be a candidate for Treasury Secretary in the Trump Administration. Who better to help the new administration reinvigorate free-market capitalism in America than the former head of America’s leading free-market think tank?
A Surprise Victory
Even well into election day, few predicted a Trump victory. Much of the mainstream legacy media predicted Clinton would win. The final national polls had Trump down a few points, and down a meaningful amount in many of the swing states he ended up winning.
Today, investors are facing an unusually uncertain environment. We have a polarizing U.S. election whose outcome could have profound implications for the country and financial markets. The U.S. economy is far from robust and, in our estimation, is in the late stages of the cycle. Geopolitically, there is a broadening quagmire in the Middle East, coupled with increased hostilities with Russia, China, and now the Philippines.
Jack Bogle did not invent the mutual fund, but he certainly turned the industry on its back. In 1974 Bogle founded the Vanguard Group based on his conviction that an investment company should first and foremost manage in a way that serves the best interest of the individual and seeks to avoid conflicts of interest. Bogle spearheaded changes within the mutual fund industry, allowing investors the option of creating a diversified portfolio without the traditional sales loads, 12b-1 fees, and high annual expense ratios that dominated the industry.
Most Profitable Move of 2016
One of the most profitable investing moves of 2016 involved no research, no trading and actually no work at all. While it now seems like a distant memory, you may recall the nosedive that stocks took to begin the year. Just 10 trading days into January, U.S. stock markets recorded their worst start to a year on record. Making matters worse, the bad days did not end quickly. Stocks continued lower into the first part of February. An Economist article asked, “Is this really 2008 all over again?”
In a surprise vote on June 23, the British decided by a 52% to 48% margin to leave the European Union (EU). The vote caught many investors and pundits off-guard. Financial markets cratered on the news, with U.K. stocks falling 16%, euro-area shares dropping 13%, and stocks in the U.S. slipping 5.3%. The British pound fell over 13%, and government bond yields hit new lows. In the U.S., 10-year Treasury yields dropped to 1.36%—the lowest level in history.