Dear Friends Family,

Welcome to the summer doldrums.

Since 1950, the summer months — defined as May 1st through September 30th — have provided an average gain of less than 1% in the S&P averages. In contrast, the remainder of the year has delivered average returns in excess of 13%.

Vacations probably play a part. Money flows are also important. Bonuses and retirement contributions fall in the winter period. Individuals receiving tax refunds tend to file early and receive their refunds early, while those paying taxes file as late as possible, withdrawing funds just before the summer period.

Another factor is the election cycle. The summer months tend to perform even worse in election years. The uncertainty of elections and the gridlock that results — often to prevent the opposing party from benefiting from legislation — can impact the markets. Politicians often emphasize negative conditions to discredit the opposing party, which affects investor sentiment and willingness to invest for the future.

Historically, the last quarter of election years has shown very positive stock performance. So, the only reasonable approach to the summer doldrums is patience. But what if the recent drop in prices is a bear market rather than a seasonal dip? In that case, history tells us bear markets typically last 6 to 9 months, while bull markets tend to last 3 to 6 years. Once again, patience would seem in order.

We believe the current downturn will ultimately drive money away from speculative investments and into high-quality, long-term investments. We are long-term investors focused on safe, high-quality growth investments at value prices. We believe this shift in capital will benefit us.

We will be holding our next seminar at Portner’s Restaurant in Old Towne Alexandria on June 15th for clients local to the area. Please take this opportunity to join us for lunch and hear our thoughts on the market and our security selection philosophy. We encourage you to bring a guest. Please contact Julie if you are interested.

Sincerely,

Katz Family Financial