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On Washington’s Birthday: What George Just Taught Us About Crossing the Delaware

This President’s Day week, those of us of some vintage still recall February 22nd as Washington’s
birthday. His most famous moment as General Washington leading the Continental Army in the
American Resolution was, of course, his daring raid at Trenton after crossing the Delaware River in
the middle of the night on Christmas, 1776. For an excellent portrayal of this threadbare moment
when the Revolution literally hung in the balance, I would highly recommend “The Crossing”, a
movie starring Jeff Daniels.
All of which got me to thinking about these dates – December 25th and February 22nd – and what
old George may have jumped off the dollar bill to teach us about what’s just transpired in the
markets between these dates!
Consider the Parallels
December 25, 1776 – Since declaring their independence in July, the Americans had
been routed by the British at every encounter throughout the fall: New York City had
fallen; the Congress had fled Philadelphia; Washington’s army – once numbering over
20,000 – had dwindled to under 5,000 and was huddled in the stark winter cold of
Valley Forge, Pennsylvania… with desertions accelerating.
December 25, 2018 – Amid the dual fears of rising interest rates and trade tensions
with China, the US markets began a slide that picked up pace after comments by Fed
Chairman Jerome Powell in an interview with PBS on October 3rd.

What followed was an accelerating selloff throughout the 4th quarter capped by the crescendo of a 9% fall for the S&P500
in December alone, making it the 7th worst (and bottom 2%) of all months over the past 30 years.

What Happened Next in Each Year?
The rest, as they say, is history:
December 25, 1776 – After crossing his troops to the New Jersey side of the Delaware overnight, Washington catches the
Hessian garrison by surprise, winning the Battle of Trenton decisively and turning around the course of the Revolution.
December 25, 2018 – Heartened by a shift away from further interest rate hikes first indicated by Chairman Powell on
January 4th and made official in the Feds meeting of January 28th-29th, US markets turned around. By Washington’s
Birthday – that’s February 22nd for the lesser-vintaged of you! – the US markets will be shooting for 9 consecutive weeks
of gains; as of February 18th, have added back just shy of $5 trillion in value3; have seen the S&P 500 Index gain over
17%4; posted a January performance for the S&P500 (up 8%) ranking in the top 4% of all months in the past 30 years.

The Moral of the Story: What Did George Teach Us?
George’s lesson of what’s played out for us here between the dates of his famous crossing and his birthday?
Just that markets drawdown and then later recover? A notion that simple: not likely worth the General’s time.
Rather, perhaps he’s hoping we might discover something about ourselves from this episode and its reflection with
history: How did we feel, maybe not exactly as the markets closed on December 24th, but when we opened our year end
account statements? Confident? Ready to take to the boats, cross the Delaware, and take on the Hessians? Or maybe we
just noticed how different we felt from when we opened our September statements?
Consistent readers of this client letter excepted, of course! Because those folks would have both been anticipating a
stretch of market gyrations, having read our Labor Day weekend letter (“Reflections on our Endless 9-Year Summer”,
September 4th) and would have been entirely unphased when opening their year end statements, having just read our
letter they received about that time (“The Brick and the Rubberband”, January 15th).
So as George, after first removing his wooden teeth as a precaution, blows out the 287 candles on his birthday cake on the
22nd, we say “Thanks, General Washington, for reminding us to always ‘Forge’ ahead!”
As the legendary investor Warren Buffet (“the stock market is a device to transfer money from the impatient to the
patient”) reminds us, we can neither predict nor control the markets. We can only control our behavior at all points along
the way to executing on our financial plans.
With none of the Founders celebrating a birthday until Thomas Jefferson on April 13th, please do call us anytime with any
questions you might have about your portfolios, the markets or the economy. Viva the Revolution!