What to Think of the Coronavirus Pandemic
Updated: May 5, 2020
This outbreak has brought about uncertainty not only in regards to financial markets but for life as we know it. As we all continue to navigate these unknown waters, please read below to find out how our team of financial advisors and financial planners are interpreting the ramifications of this virus.
“We have a high level of confidence in the durability of our portfolios, which are well diversified and focus on quality investments."
Corona Virus Update
Given the week’s steep sell-off in stocks and the increasing concerns (and hysteria?) regarding the Coronavirus and its impact on the global economy, we felt it was imperative to share our current views on the situation.
First, no one at this stage really knows how bad the situation will get. It’s simply too early to tell. What we do know is that stock markets hate uncertainty and are always susceptible to external shocks like this. To date, supply chains are being disrupted and labor-intensive industries throughout the world are being negatively affected. It’s clear the global economy and world’s stock markets will take a hit...for a while.
At the same time, we also know that the world has been enjoying a subtle, but steady global recovery and while the world may be getting sicker, the POLICIES that have supported the recovery are not changing. Here in the U.S., we’re looking at low unemployment, steady wage growth, and strong housing markets...all which lead to a resilient consumer...the bedrock of our economy. And now, lower interest rates will serve as an additional tailwind for stocks once the virus problem peaks out.
Tactically, we have anticipated a market correction, be it due to fundamental economic reasons or some external shock (which in the case of a virus - or change in political regime - can eventually work its way down to the real economy). This view has been reflected in our current asset allocations which are underweight stocks relative to traditional allocation models and overweight Hybrid investments which attempt to reduce volatility in portfolios. We have a high level of confidence in the durability of our portfolios, which are well diversified and focus on quality investments.
That being said, investors should prepare for increased volatility and possibly sub-par results for a while until the virus situation gets sorted out. Bottom line: Since we’ve pre-emptively made some tactical adjustments, we urge most investors to stay the current course and not to sell into all this uncertainty since we think stocks will react positively once the worst is behind us.
As always, we are here to discuss your particular situation in more detail. In the meantime, we are continuing to gather additional information and will keep you apprised of any changes in our views and current tactics.