Update from The Vice Chair

Cautious optimism in today’s volatile norm


314 North Street    Easton, MD 21601-3684

Chris Maxwell

Vice Chair, Board of Managers

April 20, 2022

Stock market volatility appears to be the new norm.  Why is the market so indecisive – up one day, down the next?

Our best interpretation is that the major negatives i.e. Ukraine, Fed tightening, rising inflation, supply chain problems, etc. are being alternately offset by higher corporate earnings, high levels of cash at the corporate, government, and personal level and by greater workforce participation as the absence of further stimulus checks makes seeking employment once again both more appealing – and more necessary.

The Board of Managers met on the 19th and concluded that the economy is still in good stead, but that growing risks support a more cautious portfolio stance.  Accordingly, we will be lowering our equity risk by directing some assets into the more conservative portion of the market, investing in a value index fund, and at the same time reducing our holdings in more broad market funds we currently hold.

Also, we will be lowering our overall equity exposure from the current 70%+ level, which has benefited the Fund over the past several years, to a level closer to our 65% benchmark by making normal monthly distributions from equity sales.  

A word of caution.  We have enjoyed more than a decade of rising stock prices and a generally friendly bond market. With rising interest rates and a possible slowdown in the growth of corporate profits, it is unlikely that returns will be as great as they have been over the last decade (+8.5% per year). A slowdown in the capital markets will also cause a slowdown in the growth of income you receive.  This slowdown will likely occur at the same time as prices are rising. Plan ahead. The Board of Managers is aware of your needs and is following a very disciplined approach to get the most out of our portfolio without taking undo risk.  Please call if you have any concerns or questions.