BWP Outlook – Ball of Confusion (That’s What the World is Today)
Song by the Temptations
In our newsletter dated February 6, we noted that our portfolio companies were trading above our appraisals and that we had been methodically trimming some of our positions. This left us heavily weighted in bonds but, given the attractive short term Treasury yield (4%+), we were content to patiently wait on the sideline for better entry points. Interestingly, the market peaked two weeks later.
Today, the S&P 500 has dropped 16% from its February 19 high and compelling opportunities are beginning to appear. We will remain steadfast in our selection process, focusing on shareholder-friendly companies with predictable profit growth and healthy balance sheets. In times of market turmoil, the ability to finance growth internally is imperative.
What about all the chaos regarding the tariff wars? We could share our opinion, but it would be just that, opinion. Moreover, even if our view of the future comes to pass, we doubt it would be helpful in guiding our investment decisions. Short term macro-economic predictions have no value to the long-term investor – we will continue to focus on buying wonderful businesses at prices we deem attractive.
As an aside, when markets fall, we take great comfort in knowing that sooner or later they will recapture the previous high. Historically, it has taken around nine months for the market to fully recover from a correction (defined as a fall between 10%-19%). Bear markets (defined as a fall of at least 20%) typically take longer to recover – usually a little over two years. Given that historical perspective, we could see annualized market returns between 7% and 13% over the next two to three years. This is well in excess of the 3.9% risk-free rate on a ten-year US Treasury.
Recapturing Previous High: S&P 500
Months
Start Date
End Date
Previous High
Current Level
Annualized Return*
36
4/4/2025
4/4/2028
6,096
5,141
7.00%
18
4/4/2025
10/4/2026
6,096
5,141
13.20%
*Hypothetical including dividends.
Note: Every point the S&P 500 declines from this point forward increases future returns!
We understand market downdrafts cause anxiety; all we ask is that you not act on that apprehension. From time to time the world lapses into a “Ball of Confusion” whether it be COVID, tariffs or whatever. Our team uses the resulting volatility to take advantage of the “confusion”. We are sitting on a fair amount of liquidity in client accounts so we have plenty of dry powder for opportunities and, more importantly, we will never have to sell stocks at an inopportune time to fund your withdrawal needs.
BWP Outlook – Ball of Confusion (That’s What the World is Today)
Song by the Temptations
In our newsletter dated February 6, we noted that our portfolio companies were trading above our appraisals and that we had been methodically trimming some of our positions. This left us heavily weighted in bonds but, given the attractive short term Treasury yield (4%+), we were content to patiently wait on the sideline for better entry points. Interestingly, the market peaked two weeks later.
Today, the S&P 500 has dropped 16% from its February 19 high and compelling opportunities are beginning to appear. We will remain steadfast in our selection process, focusing on shareholder-friendly companies with predictable profit growth and healthy balance sheets. In times of market turmoil, the ability to finance growth internally is imperative.
What about all the chaos regarding the tariff wars? We could share our opinion, but it would be just that, opinion. Moreover, even if our view of the future comes to pass, we doubt it would be helpful in guiding our investment decisions. Short term macro-economic predictions have no value to the long-term investor – we will continue to focus on buying wonderful businesses at prices we deem attractive.
As an aside, when markets fall, we take great comfort in knowing that sooner or later they will recapture the previous high. Historically, it has taken around nine months for the market to fully recover from a correction (defined as a fall between 10%-19%). Bear markets (defined as a fall of at least 20%) typically take longer to recover – usually a little over two years. Given that historical perspective, we could see annualized market returns between 7% and 13% over the next two to three years. This is well in excess of the 3.9% risk-free rate on a ten-year US Treasury.
Recapturing Previous High: S&P 500
*Hypothetical including dividends.
Note: Every point the S&P 500 declines from this point forward increases future returns!
We understand market downdrafts cause anxiety; all we ask is that you not act on that apprehension. From time to time the world lapses into a “Ball of Confusion” whether it be COVID, tariffs or whatever. Our team uses the resulting volatility to take advantage of the “confusion”. We are sitting on a fair amount of liquidity in client accounts so we have plenty of dry powder for opportunities and, more importantly, we will never have to sell stocks at an inopportune time to fund your withdrawal needs.
Barry, Chris, Amy, Chris, Frank & Kelsey