The Summer of Our Awakening

by | Jul 1, 2021 | Investing

I just had the great pleasure of spending a week with our team in the Bay Area for the first time in well over a year.  I can’t say I enjoyed the travel or the time change (I must be out of shape!), but it was worth it.  We have such a marvelous group of people; I feel very blessed.

And seeing the place that has been my home for so many years was better than expected, if a little strange.  Quiet and uncrowded, with an air of uncertainty lingering everywhere, it was a big change from my new home in South Florida, and night and day different from the Bay Area I am used to.

So, getting down to business…

July 4

Sunday will be the 245th anniversary of the signing of the Declaration of Independence.  One of the greatest documents in history, certainly of the history of the west and the development of self-government and the rights of free people to govern themselves.  It has to stand with the Magna Carta (a British document, ironically) as two pillars of what we now loosely call “Democracy.”

Back then, we fought Great Britain for our independence, but it wasn’t that long before we got over our animosity and instead focused on how much we had in common.  Eventually, what has become known as the “special relationship” with the UK developed and became a critical part of our international relations and security.

The view from 10,000 feet

As we contemplate our gradual emergence from the pandemic, even as much of the world continues to struggle with this menace, and as we stop to appreciate 245 years of our commitment to independence and freedom, this seems like an excellent time to take the view from 10,000 feet, the big picture if you will.  Perspective.

The economy is reopening rapidly, if not entirely smoothly.  Back to office is happening in a variety of ways.  Unemployment is dropping very sharply, and GDP growth is rapid.  Fiscal and monetary policy are extremely loose; tax policy and further enormous amounts of government spending are uncertain.

Day-to-day events are unpredictable.  One day we have the “rotation” to small and value that goes with the full reopening, but lately we see more big tech, which seems to accompany pessimism.  But the bigger picture is growth and reopening and a strong economy.

Speaking of the view from 10,000 feet or more…

If you enjoyed “Band of Brothers” and “The Pacific,” there is one more in the series coming this year, at long last.  “Band of Brothers” was a Tom Hanks/Steven Spielberg series about a company from the 101st Airborne Division in WWII.  They followed up with “The Pacific” about Marines in the Pacific in WWII.

Now they are releasing a series called “Masters of the Air” about the Eighth Air Force in WWII, which flew from the UK starting in 1942.  I am reading the book upon which it is based, and I highly recommend it to those of you with interest to understand all of what took place and the stomach for the kind of suffering and death they inflicted and endured.  When you contemplate what they gave for us, our troubles seem kind of small.

Bonus question:  which character in a famous WWII movie said, “it doesn’t take much to see that the problems of three little people don’t amount to a hill of beans in this crazy world”?[i]

As we celebrate our 245th anniversary, let’s remember that no one gave us our freedom or guaranteed it.  We have had to take it and defend it since day one, sometimes at great cost.

Meanwhile…

Stocks are really doing well, aren’t they?  Can this continue?

Good question.  The kind of big returns we are seeing lately illustrates once more how rapidly and unpredictably markets move.  Overall, markets seem to see good things.  But they are also worried about inflation.

We have discussed inflation lately; it is the topic of the day.  Monetary theory would say all this printing of money and spending like crazy will create inflation for sure!  But the Fed keeps saying it will be “transitory” this time.  They must have hired a marketing firm to come up with that word.  Don’t worry, it is “transitory.”

We can only wait and see.  We won’t see solid evidence of long-term inflation setting in until later in the year; we just have to wait.  It is comforting to remember that some parts of the equity markets do well during inflationary periods–it is not as if we have to make wild guesses and take action.  In fact, guessing and hasty actions usually end in tears; we don’t recommend them.

Please enjoy your Independence Day holiday!

Best,

Roger Hewins

President

[i] That, of course, was Rick Blaine (aka Humphrey Bogart) in “Casablanca.”

Team Hewins, LLC (“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. The information contained within this letter is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any types of securities. Past performance is not a guarantee of future returns. It should not be assumed that diversification protects a portfolio from loss or that the diversification in a portfolio will produce profitable results. The opinions stated herein are as of the date of this letter and are subject to change. The information contained within this letter is compiled from sources Team Hewins believes to be reliable, but we cannot guarantee accuracy. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas.

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