To Our Investors and Friends,

The S&P 500 rose 5.7% in November, a strong showing that coincided with an election result that brought with it hopes of both less regulation and lower taxes for the corporations that comprise the index. The 10-Year Treasury Note fell 10 basis points in the month, to end at 4.18%. The 2-Year Treasury Note dropped 3 bps to end the month at 4.13%. Oil fell about 1% in the month to close at $68 a barrel. Small cap stocks rallied strongly ahead of large cap stocks, potentially ending a decade of underperformance. The Russell 2000 Growth Index rose 12.3% and Russell 2000 Value Index increased 9.7% as investors embraced the prospects of greater acquisition activity and less of an impact from a potential global trade war for this group of companies. The Russell 1000 Growth Index gained 6.5%, and the Russell 1000 Value Index rose 6.4%.

Many describe the stock market rally as a relief rally that comes with the certainty of a smooth transition of power. We believe that the election shed light on the disenchantment of many working age men and the stock market rally reveals the hopes that they have for an improvement in their circumstances with a new administration. Time will tell whether these hopes are validated.

In his book Of Boys and Men, Richard Reeves describes the predicament of non-college educated working men as structural in nature and believes that a change in the administration will do little to improve their prospects. According to Reeves, the information age has materially changed our economy, and as a result, “labor force participation among men of prime working age has dropped 7% points over the last half century from 96% to 89%.” He further explains that this is an acute crisis for Generation Z and Millenial men as “the biggest fall in male employment has been among young men between the ages of 25 and 34.”

Reeves states, “Male jobs have been hit by a one-two punch of automation and free trade. Machines pose a greater threat to working men than to women. The occupations most susceptible to automation are more likely to employ men.” Brookings Institute fellow Mark Muro explains, “Men make up more than 70% of production occupations, over 80% of transportation occupations, and over 90% of construction and installation occupations. These are all occupational groups with current task loads that have above average projected automation exposure. By contrast women make up most of the work force in relatively automation-safe occupations such as healthcare, personal services, and education.”

The one thing we can be certain of is that automation will only increase during the AI revolution. This means that the answer to solving the challenges of the uneducated male workforce is not a return to the past but rethinking what their roles can be in the future. It is important that we find ways to reverse the unemployment trends tied to automation and help these men again find purpose.

At Kingsland Investments, we will continue to search out those companies that are making life better for their customers, employees, and shareholders by coming up with solutions that are superior to those that they are replacing. We will use periods of short-term market enthusiasm to make sure that the portfolio is well positioned for the long run.

All the best to you,

Arthur K. Weise, CFA