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Market Commentary— Celebrating the 35th Year of Tandem & the 100th Edition of The TANDEM Report

Market Commentary was written by Tandem’s President & Founder, John B. Carew, in honor of the 100th edition of The TANDEM Report.

In the short run, the market is a voting machine. In the long run, it is a weighing machine. ~ Benjamin Graham

In the short run, the market is driven by momentum, sentiment, news, and expectations. In the long run, the market is driven by consistent execution by companies. Presently, the market is being fueled by as-yet unfulfilled expectations around artificial intelligence, or AI. Beyond the immediate, profits will matter.

Tandem was incorporated 35 years ago, on October 5, 1990. The S&P 500 closed at 311.50 that day. Nearly 10 years later, the first edition of The TANDEM Report (TTR) was published on July 10, 2000. The S&P 500 closed at 1,475.62 that day. During the 1990s, the S&P was fueled by what we now know to have been excessive speculation about the development and impact of the internet. In the time between Tandem’s founding and the first publication of TTR, the S&P produced an annualized return of 17.30%, and that doesn’t even include dividends.

As it turns out, the internet has proven to be even more than we imagined. However, corporate profits turned out to be far less than we imagined. As a result, for the 10 years following the first publication of TTR, the S&P produced an annualized price change of -3.09. Imagine that. Remarkable gains for 10 years, followed by 10 years of losses. If we combined those two 10-year periods, from Tandem’s inception through July 2010, the S&P produced an annualized price appreciation of 6.49%.

That is a lot of numbers, and it probably makes for boring reading. But bear with me. Since the inception of Tandem through the end of September 2025, the S&P 500 has experienced an annualized price appreciation of 9.14%, excluding dividends. That’s 35 years of data, so let’s just assume for now that 9.14% is about what we should expect over time. Not 17.30%, nor -3.09%.

Now for an assessment of the current market. This year, the S&P 500 has been on a roller coaster ride, with an amazing ascent from the bottom. At the bottom, on April 8th, the S&P’s price had declined by 15.28% for 2025. Since then, the S&P’s price has appreciated an eye-popping 33.68% in less than 7 months! In the short run, the market is a voting machine.

The accompanying chart illustrates the volatile ride this year for the S&P 500, while comparing it with the S&P Low Volatility Index and the Bloomberg Magnificent 7 Index. Low Volatility has delivered the smoothest experience, but the other two indices have delivered a more rewarding experience thus far. For an investor with 20-40 more years of earnings, buy the dips with enthusiasm. For those at or near the age when we rely on our investments to supplement our retirement, or without enough time to replace what is lost in the market, these violent dips can undermine our plans. If a portfolio relied upon to produce distributions experiences steep declines, it increases the likelihood that over time, the portfolio will be depleted. Smoother rides like the Low Volatility Index may not produce the outsized returns in up markets, but the lack of major declines increases the likelihood that the portfolio can sustain itself.



Source: FactSet

We have devoted a lot of words to past experiences, and fewer to present. If you were looking for deeply meaningful commentary on the last quarter’s news, I apologize. This market concerns me, and I believe past may be prologue. 2022 was a down year for the S&P 500. From its low point in October 2022 through September 2025, the S&P is up approximately 90%, for an annualized return of more than 23% over these past 3 years. This is not normal, and it is not sustainable.

There are plenty of people smarter than me explaining why this boom can and will last. I believe that AI is meaningful and will lead to many great, and potentially scary, things. I also believe the returns of the past 3 years more than reflect AI’s future potential. We are now paying for expectations that may or may not be met. Remember the decade that followed the 1990s, with negative returns for the S&P? I believe this could easily happen again.

All is not lost. Today’s version of the S&P is less reflective of the broader stock market than at any time in its history. The index today is uncomfortably dominated by 10 names, all in basically the same industry. The index may correct, or worse, but that doesn’t mean the other 490 stocks will. The market has been voting. In time, it will start weighing. For investors that are not in position to withstand dips, or worse, stay invested, but manage your risk. Go for the smoother ride, which happens to be what Tandem is known for.

Commentary— Taking the Long View

Written by: Benjamin “Ben” Carew, CFA

Over the past year we have spent much of our Commentary discussing the benefits of a more consistent investment experience. In the October 2024 issue, we illustrated our belief that avoiding large declines in a portfolio can lead to a more consistent investment experience. We went on to say, “The strategy of losing less does not mean be conservative. It does not even have to mean you will make less. It simply means that managing risk as well as your return might lead to a better experience.”

In January, we broadened our topic of conversation as we did a market check-up. At the time, we expressed concerns about the abnormal concentration within the S&P 500, the historically elevated valuations within the market, and how if history is any guide, then future returns for the S&P 500 might be more limited than what passive investors (those who invest using index funds built to match an index’s performance) have grown accustomed to over the past 10-15 years.

From there, we discussed “time in the market, not timing the market” in our April issue as we highlighted the importance of staying invested and staying the course through turbulent markets. Finally, in July, we opined on the drivers of return and the importance that we think can be found in owning companies that are able to consistently grow the fundamental metrics that Tandem believes to be vital.

Carrying on in that same vein, today we are set to discuss the importance of the sequence of one’s returns, especially when approaching retirement, entering retirement, or in retirement already.

At times, there is a belief that the job of an asset manager like Tandem is to create wealth and that the secret to riches can be found in the stock market. I consider those to be misplaced beliefs. In reality, wealth is created by you – the individual.

From March of 2000 through the end of September, the S&P 500 has grown 617% when including dividends. That sounds tremendous, and it is. $100,000 invested in the S&P 500 at that time would have grown to nearly $720,000 today. However, if someone had instead saved $2,500 each and every month and didn’t invest it at all (in other words, the savings grew at 0% per year), they would have $765,000. Wealth is created by the individual.



Source: FactSet

However, consider what happens when that individual actually invests the proceeds of their savings. When a client, their advisor, and their money manager work in “Tandem” to save AND invest, they are clearly better off – as evidenced by the chart below which shows the benefit of regular saving plus investing.



Source: FactSet

I believe that is a powerful story and is highly relevant for investors that have 25+ years of savings in front of them. It is an important lesson for most investors under the age of 40. However, that is not most investors. In fact, according to the Federal Reserve, nearly 3/4s of wealth is held by individuals that are 55 and older. That means that most wealth is held in the hands of folks that are approaching, entering, or already find themselves in retirement.

Prior to retirement, individuals can create wealth by saving AND investing. They can create wealth by depositing checks into their investment accounts and watching the investments compound and grow over time. Typically, once someone has entered retirement, that calculus changes. Upon retirement, most individuals enter the distribution phase of life and go from being net savers to net spenders. Instead of checks going into investment accounts, checks begin being distributed from investment accounts.

Once one enters the distribution phase of life, risk tolerances and preferences can often begin to change – and rightfully so. According to data from Ned Davis Research, bear markets occur on average every 3.5 years. For those that are firmly in the savings phase of life, that does not need to be concerning. Monthly savings coupled with time can help make up for investment drawdowns. For one approaching, entering, or already in retirement (the distribution phase of life), bear markets can be a bit more nerve wracking as the ability to produce income over time changes for someone either no longer in the workforce or that is exiting the workforce in the next handful of years.

Painful drawdowns can be difficult to surmount when one is in the distribution phase of life. Preserving and protecting capital becomes significantly more imperative. The sequence of one’s returns becomes incredibly important.

I am a firm believer in planning for the worst and hoping for the best. With that in mind, one of the worst periods that one could have invested in modern history is on the eve of the bursting of the Dot Com Bubble in 2000. The Dot Com Bubble burst and the S&P 500 fell more than 25% by early September of 2001. Then, America was attacked, and the twin towers were felled. Markets closed. People were scared. The S&P 500 dropped nearly 30% over the ensuing 13 months. Over a 2.5-year period, from March 2000 through October 2002, the market fell 50%. It wasn’t until May 2007 that the S&P 500 reclaimed its old highs. 7 years without setting a new high-water mark. Those all-time highs were fleeting as the fall of 2007 marked the last high prior to the Financial Crisis. At its lows in March 2009, the market had fallen 57.69%. It was a devastatingly painful bear market. It wasn’t until April 2013 that the S&P 500 reclaimed its old highs once more. Things were then largely good and great for the next 7 years – with just some minor hiccups here and there including one bear market in 2018. Then, 2020 brought on the COVID induced crisis and markets tumbled 35% in a matter of weeks. This time the market recovered much more quickly, reclaiming its highs once more in the second half of 2020. Inflation scared markets in 2022 as interest rates rose and the S&P 500 fell 25% again. Four painful and sizable drawdowns over a 25-year period is why I call that one of the worst times to invest.

Despite all of that, the market has grown a whopping 617%. Many claim this to be a win for the advocates of passive investing – time heals all. I don’t think most individuals felt like their investment portfolio was winning in October of 2002, March of 2009, March of 2020, or October of 2022. While investing passively may have worked over that 25-year timeframe, what was the investment experience like?

To illustrate this, the Commentary section of the October 2024 Tandem Report showed the S&P 500 over that same time period and a hypothetical portfolio that captured 65.5% of the S&P 500’s upside and only 50% of the market’s downside. The premise was that often individuals think that “being conservative” when it comes to investing means making less. We don’t believe that to always be the case. The hypothetical portfolio performed just as well as the S&P 500 over that same time frame. I think the hypothetical portfolio also likely would have given one a little more peace of mind during periods of heightened turmoil in the marketplace. I believe that for most individuals, giving up some of the upside to protect more during the downturns would have been a more enjoyable experience.



Source: FactSet

In retirement, this concept becomes infinitely more important. First, there is no longer as great of an ability to offset investment losses with a lifetime of income earned. A 25-year-old that loses 50% of an investment portfolio likely has 30-40 more years of savings to offset those losses. There is still time to benefit from the savings AND investing that we discussed earlier. That is not true for most individuals in the distribution phase of life.

What is perhaps more damaging for a portfolio in the distribution phase is that money is often coming out of an account to pay for life. Whether its one’s mortgage, healthcare expenses, trips to see the world or one’s grandkids – life happens and money often gets spent in retirement, not saved. So, let’s revisit those hypothetical portfolios, except this time, we are going to account for money coming out of the account. In this instance, we are going to model out $50,000 coming out of the portfolio on a yearly basis.



Source: FactSet

*This is not a real investment. This is created for illustrative purposes only.

When money was not being distributed out of the account, the two portfolios have a similar result over time with two very different investment experiences in between. However, when money begins coming out of the portfolio the outcome is dramatically different. The portfolio that was passively invested in the S&P 500 over this 25-year period would have run out of money. The portfolio that is protecting and preserving capital would be very much alive and kicking.

Too often as investors, we focus on absolute returns while failing to properly account for the risk that one takes to achieve that return. The path to a successful investment experience, clearly, is not just in only seeking higher returns. It is also found in protecting a portfolio and managing risk effectively. By managing risk AND return, investors, advisors, and asset managers alike may find themselves on a smoother ride through their financial journey.

It is our belief that this message is timely today. In part because wealth is now predominantly found in the hands of individuals that are more likely to be nearing or are already in the distribution phase of their investment life cycle. However, it is also timely because of where markets are today. The points we discussed in January of this year, highlighting the concerning nature of the concentration within the index and the elevated valuations of the index, have led a number of market strategists to predict that we will see lower returns over the next decade than what we have seen over the past 10-15 years. To this author, if those strategists are right, then that means volatility would likely become more commonplace. That means the sequence of one’s returns becomes increasingly important. It means capital preservation for those in the distribution phase is paramount.

As a reminder, Tandem always strives to deliver a more consistent, more repeatable, and less volatile investment experience. It is our belief that limiting volatility and delivering a more consistent experience within our clients’ portfolios can not only help them stay invested but stay on track to reach their financial goals. Balancing both risk AND return, rather than just seeking return, can be the difference between uncertainty and confidence in one’s financial journey ahead.

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Disclaimer: Tandem Investment Advisors, Inc. is an SEC registered investment advisor.

This audio/writing is for informational purposes only and shall not constitute or be considered financial, tax or investment advice, or an offer to sell, or a solicitation of an offer to buy any product, service, or security. Tandem Investment Advisors, Inc. does not represent that the securities, products, or services discussed in this writing are suitable for any particular investor. Indices are unmanaged and not available for direct investment. Please consult your financial advisor before making any investment decisions. Past performance is no guarantee of future results. All past portfolio purchases and sales are available upon request.

All performance figures, data points, charts and graphs contained in this report are derived from publicly available sources believed to be reliable. Tandem makes no representation as to the accuracy of these numbers, nor should they be construed as any representation of past or future performance.

This document was originally written/recorded in English. Tandem does not guarantee the accuracy, completeness, or reliability of any translated materials, and shall not be held responsible for any discrepancies, errors, or misinterpretations arising from the translation process.