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January 3, 2023

By Mark Oelschlager, CFA

In 1943 the Perfect baby was born in Lancashire, England - Christine Perfect.  She studied music as a child, and after a stint with a band called Chicken Shack, she joined Fleetwood Mac, for whom her husband John McVie played bass.  With her contributions as a songwriter, vocalist, and pianist, the band went on to become one of the most popular of all-time.  But Christine McVie largely avoided the limelight, content to let stars Stevie Nicks and Lindsey Buckingham and even drummer Mick Fleetwood garner the attention.  That disposition – despite her many accomplishments – created a soft spot in the hearts of many fans, including this one.  If you’ve turned on a TV over the past few months you’ve almost surely heard her voice; you just may not know it.  The catchy song (Everywhere) in the ubiquitous Chevrolet EV ad in which everyone is singing along?  Written and sung by Christine McVie.  She died about a month ago at the age of 79.
The impact of the Federal Reserve (Fed) on the markets remained Everywhere in the fourth quarter, as it added 125 basis points to its Chain of interest rate hikes, bringing the 2022 total to 4 ¼ percentage points, and it maintained its strong rhetoric, promising to do whatever it takes to bring down inflation.  After being so loose for so long, and insisting as recently as 2021 that the inflation problem was a Temporary One, the Fed, led by its Chairman Jerome Powell, has been consistently hawkish in its public comments.  But the market viewed these as Little Lies, accustomed to the Fed always returning to its Warm Ways when things got tough.  The market is slowly starting to believe, though it may not be factoring a recession into stock prices.
Save Me
The Fed remains resolute because the consumer’s purchasing power is being eroded by inflation.  Prices are still rising at a rate well above the Fed’s target, though they showed some progress in the quarter.  The inflation problem of the last couple years started with the supply-chain issues of the pandemic and was exacerbated by the massive monetary and fiscal stimulus provided by the Fed and the federal government, respectively.  Because the inflation in goods was not reigned in, it bled into services.  So now, services prices have taken the inflation torch from goods.  The main reason for this is the cost of labor.  For a variety of reasons, the supply of labor is down.  And because the economy has remained relatively healthy, the demand for labor has stayed strong.  This has created an acceleration in wage inflation.  With companies forced to pay higher wages, they naturally look to raise prices, which of course causes workers to demand higher wages.  It’s a classic wage-price spiral (see the 1970s, where this happened Over and Over).  For decades this was thought to be a thing of the past, but now it has returned.
Chairman Powell acknowledges the problem with the labor market but is careful with the words he uses.  Nobody likes rising unemployment, but it’s pretty clear that’s what is needed in order to arrest the wage-price spiral.  Employment tends to lag other economic variables; recall how long it took to recover in the last couple economic expansions.  So, it will be interesting to see how long it takes for unemployment to rise as we enter recession – and we do believe there will be a recession in 2023.  We expect economic growth to slow or turn negative well before unemployment spikes.
Got a Hold on Me
There were two noteworthy events in China in the quarter.  First, President Xi broke norms, consolidated power, and secured a third term while surrounding himself with those loyal to him.  Later, the world’s most populous nation abruptly relaxed its restrictive Covid policies.  This change is a positive economically, but there will be some pain in the short-term, as cases there have surged and hospitals are overwhelmed.  Rather than eradicating the virus, China’s long lockdowns simply delayed the wave of infections – at the cost of many of its citizens living for years in isolation.
Say You Love Me
Back Stateside, the midterm elections did not result in the Republican wave that some had expected.  The GOP did gain control of the House but not the Senate, which sits at 51-49, Democrats.  Going forward it should be more difficult for the Democrats to push through partisan legislation.
Over My Head
Cryptocurrency exchange FTX, which was recently valued at $32 billion, collapsed, which sent shockwaves through the crypto markets but perhaps surprisingly didn’t result in a cascade of failures – at least not yet.  Bitcoin fell about 15% in value during the quarter, bringing its loss for the year to about 65%.  The Fed’s draining of liquidity from the economy should continue to provide a difficult backdrop for speculative assets like crypto.
Milton Friedman described inflation as always and Everywhere a monetary phenomenon.  After an unprecedented rise in the money supply in 2020 (followed by rising inflation) the US is set to experience the first year-over-year decline in M2 money supply in many decades.  This may be a headwind for both the economy and asset prices.  We mentioned last quarter that the economy is arguably less sensitive to interest rates than it was before, but this could be as much a curse as a blessing if it forces the Fed to remain tighter for longer in order to slow the economy sufficiently to cool inflation.  In any event, it is our belief that the dramatic rate hikes of the past year have to at some point have an impact on the economy.
Stocks actually rose in the quarter, perhaps due to sentiment becoming overly bearish at the end of Q3 and the minor improvement in inflation.  For the year the S&P 500 declined more than 19%.  Dividends brought the total return to about -18%.  The return for our main fund, Towpath Focus, was roughly -2%.  While this is only one year, and we always emphasize longer-term returns, it is gratifying that we were able to protect our clients’ portfolios in such a difficult year for just about all asset classes.  One of our philosophies is that if we focus on the long run when we invest, the short run will take care of itself.  While we know there will be years in which we underperform the broader indices, that’s exactly what happened in 2022.
Our fund hit the three-year mark at year-end, which is a bit of a milestone in the investing world, and it’s been a good start with our returns well ahead of the S&P 500, Russell 3000, and our peers since launch.  We are thankful for your trust in us and plan to continue investing on your behalf for many years to come – As Long as You Follow.

Mark Oelschlager, CFA  

Oelschlager Investments 

Total Return as of 12/31/22

Towpath Focus Fund

Russell 3000® Index

S&P 500® Index


Fund returns are net of fees.

Gross Expense Ratio: 1.23%, Net Expense Ratio: 1.11% (Contractual until 3/31/2023)

Q4 2022





Since 12/31/19 Inception








Since 12/31/19 Inception*




Total Return as of 12/31/22

Towpath Technology Fund

Morningstar Tech Category 


Fund returns are net of fees.

Gross Expense Ratio: 3.23%, Net Expense Ratio: 1.12% (Contractual until 3/31/2023)

Q4 2022




Since 12/31/20 Inception






Since 12/31/20 Inception*




The performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please call Shareholder Services at 1-877-593-8637 to obtain performance data current to the most recent month-end.

To determine if this Fund is an appropriate investment for you, carefully consider the Fund's investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fund's Prospectus which may be obtained by calling 1-877-593-8637 or visiting our website at Please read it carefully before investing. 

Mutual fund investing involves risk, including possible loss of principal. 


The statements and opinions expressed are those of the author and do not represent the opinions of Towpath Funds or Ultimus Fund Distributors, LLC. All information is historical and not indicative of future results and is subject to change. Readers should not assume that an investment in the securities mentioned was profitable or would be profitable in the future. This information is not a recommendation to buy or sell. 


This manager commentary represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. 


The Russell 3000 Index is a market-capitalization weighted index measuring the performance of the 3,000 largest U.S. companies based on total market capitalization. The S&P 500 Index is a commonly recognized market capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. The Morningstar US Technology index measures the performance of companies engaged in design, development, and support of computer operating systems and applications, manufacturing of computer equipment, data storage products, networking products, semiconductors, and components. Unlike mutual funds, an index does not incur expenses. If expenses were deducted, the actual returns of an index would be lower. You cannot invest directly in an index.


Click here to view ​Towpath Focus Fund Top 10 Holdings as of 12/31/2022.  Click here to view Towpath Technology Fund Top 10 Holdings as of 12/31/2022. Current and future portfolio holdings subject to change. 

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Towpath Funds are distributed by Ultimus Funds Distributors, LLC (Member FINRA). Ultimus Fund Distributors, LLC and Towpath Funds are separate and unaffiliated. 


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