Historic Quarterly Letters

Straight A’s and Sustainability

2019 Q4

When you bring straight A’s home from school you don’t have much explaining to do. That was 2019 for financial markets. Most major indices were up more than 20% and bonds rallied in concert with stocks. The decade exited with a bang as the S&P 500 closed with a plus 13% annualized return – well above its historic average. It is truly amazing that such significant changes can occur in a relatively short span of ten years. Back in late 2009 no one was buying Christmas presents or watching Home Alone on their smartphones.

Scientists largely believe that Homo Sapiens have been on the planet for about 195,000 years. It took about 150,000 years for the “Great Leap Forward” when people began burying their dead and using animal hides for clothing. Skipping forward another 40,000 years, or 10,000 years ago, agriculture developed and spread. It then took another 5,000 years for writing to develop. Finally, some 5,000 years after that we got the iPhone! (There you go – the history of the world in one short paragraph).

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Windshields, Bumps in the Road & The Right to Water

2019 Q3

We were happy to announce the acquisition of Falcons Rock last month and are thrilled to add Greg Wait and Liz Kiefer to the Riverwater team. Riverwater and Falcons Rock share similar philosophies around responsible investing and we believe the combined entities are both stronger and better positioned to generate greater impact together going forward. For the new clients and readers of our quarterly letter, we welcome you and look forward to meeting soon.


The S&P 500 hit an all-time high in July and finished about 2% off of that high at quarter’s end. Small cap stocks, on the other hand, last peaked in August of 2018 and have a flat return going back to October of 2017. Markets have fluctuated weekly, if not daily, on trade tariffs and Federal Reserve news. Additionally, political winds in DC seem more likely to turn into gusts with Congress initiating impeachment hearings on the President.

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Record Highs and a Record Win!

2019 Q2

Equity markets notched another fine quarter to close out the first half of the year with gains across the board. The first six months of the year marks the strongest stock market since 1997. There are many reasons markets are hitting all-time highs: employment is strong, the economy just broke the record for the longest expansion in history, and most investors now expect the Federal Reserve will cut interest rates this year.

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Nice Market Lyft!

2019 Q1

From a performance standpoint, the first quarter of 2019 was essentially the inverse of the previous quarter; in Q4 2018 it was hard to find a winner whereas this quarter it was hard to find a loser.  The market experienced the best first quarter in over 20 years, a sharp 180 from December’s performance which was the worst since 1931.  The volatility in the market is proof that investors are better off staying focused on the long-term and ignoring market gyrations. Those that hyper focus when markets are falling often end up selling out at the bottom.

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The Santa Claus Rout

2018 Q4

The market’s year end was both interesting and historically quite rare. Going back to 1950, December has been historically the best performing month, with an average monthly return of 1.53% compared to a 0.50% return for the other 11. The Santa Claus Rally failed to materialize in 2018 with broad markets down across the board and we experienced the worst Christmas Eve in the history of the market. The last time December was this weak was in 1931, making this the worst fourth quarter we can remember.

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It Just Keeps Going and Going…

2018 Q3

The best way to describe the end of the third quarter is to steal the Energizer Bunny’s tagline, “it just keeps going and going…”[1] The end of September marked the longest running bull market since World War II and the longest most investors have seen in their lifetimes. Equity markets in the US were up across the board and growth stocks continued to outpace value stocks by a wide margin. (As value investors, we look forward to a reversal.)

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Tariffs and Action on the Soccer (Football) Field

2018 Q2

The second quarter equity markets were dominated by headlines surrounding the Trump administration’s proposed tariffs. The tariff talk subsequently turned into action with new tariffs enacted by the US, China, Mexico, Canada, the European Union, India and Turkey.

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Defensive Investing and Recognizing Failure

2018 Q1

The first quarter could very well turn out to be a memorable inflection point in this 10-year bull market. The broad indices ended their nine-quarter streak of positive returns, volatility returned with markets moving up or down with much greater magnitude, and the bull market leaders Facebook, Apple, Amazon, Netflix and Google are not looking so bulletproof anymore.

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Everything is Relative

2017 Q4

It doesn’t get much better than this! Double digit gains across major stock indices, twelve straight months where the S&P 500 never went down (first time in its history), and record low volatility. The economy is finally out of second gear with GDP at +3%, unemployment levels at 18-year lows, consumer confidence at levels not seen since 2004, and tax rates heading lower.

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Value Investing: The Only Constant is Change

2017 Q3

Another quarter in the books and another quarter where equity markets had broad-based gains. Our benchmarks, the Russell 2500 and Russell 1000 Value, were up 4.7% and 3.1% respectively, while every sector in the S&P 500 was up except for Consumer Staples.

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Spoiled Investors

2017 Q2

We, as stock investors, have been spoiled as markets continue to go up with virtually no downside. The VIX, or CBOE Volatility Index, has been trading at its lowest level in 25 years. How long can this investment environment exist?

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A Quiet Start, Buying and Holding Stocks

2017 Q1

In sharp contrast to wild ride at the end of 2016, 2017 began in remarkably calm fashion. While U.S. stock markets were broadly higher, gains occurred with the least volatility since 1965. Over the entire quarter, there were only two days when the S&P 500 moved more than 1% from one day to the next and these movements were relatively unremarkable; once up 1.4% and once down 1.2%.

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Emotional Investing

2016 Q4

2016 was a tumultuous year for the election pollsters and odd makers. What was more improbable: the Chicago Cubs winning the World Series or a billionaire winning the White House?

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Riverwater Partners Invests Beside You and Our Three Pillar Approach

2016 Q3

Another quarter in the books and another quarter where equity markets had broad-based gains. Our benchmarks, the Russell 2500 and Russell 1000 Value, were up 4.7% and 3.1% respectively, while every sector in the S&P 500 was up except for Consumer Staples.

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