The economy remains very bifurcated, though. Large corporations are faring better than small ones
that need more access to credit. In fact, small company earnings are still falling (S&P 600) while the
S&P 500 has delivered three quarters in a row of earnings growth. Consumers, especially at the
bottom of the economy, are feeling the pinch of an overall higher price level even though inflation has
moderated significantly. Food costs, for example, are up over 25% since 2019, or about 5% per year.
Finally, it’s important to separate the economy and the stock market. In general, our portfolios focus
on the largest 500 public companies, while the backbone of the economy is composed of millions of
small businesses.

Angus: How does the approaching US presidential election affect the way Tandem invests?

Amy: In general, investors crave certainty. Anything that upsets the normal course of business can
hurt a corporation’s future earnings stream and stock/ bond price.
New presidential administrations often instigate change with financial consequences. We are
most interested in proposals that 1) change how a business or industry must operate or 2) change
consumer behavior. Examples include a change in the corporate or personal tax code, a new
regulation, or changes to an existing one.
Legislative changes at the national level, however, are difficult to enact without same-party support
of the President, House, and Senate.

Angus: The world is currently experiencing two wars. Does that influence the way Tandem invests?
Amy: The same principle applies – investors want certainty. Given the food and energy independence
of the US, these two particular events have had little effect on the US economy, in general, outside of
financial aid packages.