Keeping Financial Markets in Perspective
In the 30+ years that I have been providing financial planning and investment advice to clients, we have faced numerous unsettled markets. Many of our valued clients have lived through these with me, including a few recessions, the savings and loan crisis in the late 1980s, the dot-com bubble of 2000, the September 11 attacks, the great financial crisis of 2008, and a few pandemics. While each of these crises was different, one thing remains the same. The crisis is resolved, the economy moves forward, and investors who maintained a long-term focus are rewarded for their patience.
As your trusted adviser, I never want to minimize the seriousness of any crisis, such as the current pandemic of novel coronavirus (COVID-19). At the same time, I do not wish to panic, which is never beneficial to the successful management of your portfolio. Each time we face a crisis, the common feeling from clients is that "this time it feels different." This is a natural response, but in each case, the markets bounced back. What is different this time around is that we live in an interconnected world and global economy. We have an overflowing daily barrage of news and social media from so many sources that are fueling the panic.
The markets are now in full correction, and we will continue to see significant fluctuations. There will be good and bad days. While these can be extremely stressful, they are normal as investors try to determine the extent of the economic impact. Throughout history, one thing has always remained true - attempting to time a market top or bottom is never a good idea and can have a detrimental impact on the success of a portfolio. This correction has been the fastest in history, and a rebound could happen just as quickly.
This is not to say that we are sitting back and watching from the sidelines. We do make tactical adjustments to asset allocations to reduce some risk, but it is not in your best interest to sell good investments due to fluctuations and a slowing economy. We take the current markets seriously and are careful to respond appropriately to the facts and numerous fundamentals, including many that are never reported in the news. The markets are leading indicators and will also price in the recovery on the other end, ahead of when the situation stabilizes.
Since last year, we have raised a great deal of cash and made other adjustments to client portfolios in expectation of a slowing economy as we have been writing about for almost a year. The novel coronavirus is continuing to make a financial impact, and the economy is slowing down much more quickly, with an expectation of negative earnings growth for at least one quarter. We expect significant fiscal and monetary policies to help the economy recover as quickly as possible.
As is always the case; If clients are withdrawing money from a portfolio, we have already been making sure that there is plenty of cash or liquidity available in portfolios so that there is no need to sell assets at an inappropriate time. We will continue to adjust portfolios as necessary to respond to changing economics, withdrawal needs, or to help you sleep better at night. For those clients that are adding money to their portfolios, we appreciate the inflow and are being measured and careful in how these funds are being invested.
Please reach out to me or my team to discuss your concerns and get your questions answered. We are all available to take your calls and respond to your emails. You should also know that as a part of our business continuation planning, we are well prepared as an organization to work remotely if necessary.
We hope everyone stays safe and healthy. Thank you for your continued business and trust.
Michael A. Schreiber
President, Aevitas Wealth Management