Defying the Skeptics

Global equity markets are near record highs in early July, having swiftly recovered from an 8-10% selloff in March at the outset of war in Iran. While diplomatic progress has been tenuous, economic growth has continued and business results have been strong for a variety of technology, industrial, and financial companies. We think the quick comeback from March distress is the latest proof of how difficult it is to “time” the market.

250 Years Young

The 250th anniversary of the United States makes us reflect on the enduring power of American capitalism. Over two and a half centuries, this economic system has transformed a fragile, heavily indebted upstart of 13 coastal colonies into a global economic hegemon.

America’s economic progress required frequent adjustment. The United States began as an agrarian society, its economic output tied directly to land and agricultural yields. As the global landscape shifted, America adapted, giving rise to an industrial powerhouse where basic industries like steel, railroads, and manufacturing became preeminent. When heavy industry matured, capital and labor migrated to consumer products, healthcare, finance, and technology.  Within technology itself, the nation mastered successive waves of transformation. Leadership moved from the massive scale of mainframes to the accessibility of personal computers, development of the internet, the connectivity of mobile devices, the efficiency of cloud computing, and now, the industrial-scale deployment of artificial intelligence. Each transition initially brought skepticism and displacement, but each ultimately created higher living standards and wealth for long-term investors. This intrinsic dynamism displaced many seemingly invincible corporate titans along the way. Dependable conveniences of earlier times – a Sears catalog, a Western Union telegram, or a Polaroid instant camera – are anachronisms today. The reliable jobs of previous eras changed as well. Almost 1/3 of America’s workforce labored on farms in 1926 while less than 2% do so a century later despite staggering increases in agricultural output.

Warren Buffett summed it up well when he observed that betting against America hasn’t worked since 1776.

Past & Prologue

A common disclaimer in investment reports is that “past performance is not a guarantee of future results.” Many citizens might suggest this warning for America, given worries aroused by high federal debt, political polarization, and geopolitical distress. Bartlett shares these concerns, but we believe they are neither unprecedented nor unresolvable. As noted in prior reports, we are fond of the saying that history doesn’t repeat itself, but it rhymes. It would require a separate letter to discuss the historical parallels that occur to us today. For now, we suggest that the likes of Washington, Hamilton, Jefferson, and Lincoln – and more recently Roosevelt, Eisenhower, and Kennedy – might suggest our current troubles are far less vexing than the crises they encountered.

Humility vs. Hubris

Prosperity for the American investor has paralleled the country’s progress. Reviewing the last 25 years, we find corporate profits and dividends for S&P 500 companies grew at just over 6% per year, with stock prices rising at a comparable rate, and the total return for investors (dividends plus growth) was 8% annually. Wealth grew nicely over time at that rate of progress, for a patient investor.

 Bartlett is certainly betting on America’s future, but we’re doing so with appropriate safeguards, our confidence leavened by humility. Our country’s history includes plenty of setbacks. Some were temporary, others more lasting. A common aspect of all was the damage suffered by an unprepared investor who reacted emotionally. With stocks near record highs, remembering previous peak-to-trough declines for the S&P 500 Index is worthwhile.

• A 19% selloff occurred early in 2025, climaxing after the “Liberation Day” tariff announcements.
• In 2022, stocks fell 25%, and bonds declined significantly, amid the highest inflation in 40 years.
• Stocks fell 34% over a 5-week period at the start of the 2020 COVID-19 Pandemic.
• Stocks declined by almost 19% during 2018, buffeted by trade frictions and higher interest rates.

Of note, the recovery time from these recent setbacks was rather short. Most memorable is what happened in 2020, when stocks returned to record highs by August, just five months after the pandemic low in March. Simply put, it didn’t hurt for very long. However, investors should not complacently count on quick recoveries. The recovery time from the 2008-2009 Global Financial Crisis was four years, and comebacks were similarly extended following bear markets in 2001-2002 and 1973-1974.

The takeaway for long-term investors: make sure portfolios are “built to last.” Safeguards may seem unduly restraining in good times, but precautions are validated when shakeouts occur. Much like a reliable driver, the shrewd investor makes sure their “seatbelts” – asset allocation, diversification, cash planning, and periodic rebalancing – are securely fastened. This is especially important for individuals and institutions relying on portfolio distributions. Mindful of risk, and aware that severity and timing are unpredictable, we want occasional market selloffs to be periods of opportunity rather than peril. This is a guiding principle for Bartlett.

Concluding Comments

We close with our usual gratitude for your trust and loyalty. We never take this for granted! Bartlett has continued to add new business in 2026, and we would like to help more clients. Please recommend us to family, friends, and associates who could benefit from our financial planning and investment management services.

DISCLOSURE:
This material provided by Bartlett Wealth Management (“Bartlett”) is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Nothing in these materials is intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Opinions expressed by Bartlett are based on economic or market conditions at the time this material was written; actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Bartlett, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.