Second verse, same as the first… A little bit louder and a little bit worse.

March 2020 has been a rough month for the markets.  This week has been a continuation of what we have seen since the end of February, much like the song lyric above.  This time around has been even rockier than last week.  We have seen an elevated level of caution from officials and we officially have a pandemic to contend with.  As that happened, a flurry of events were postponed or canceled and schools were closed.  This has ramped up the panic and hysteria to levels not seen in a long time.  At the time of this writing (3/16/20) all three indexes have officially returned to bear markets.  We saw this happen at the end of 2018, but this time it certainly feels different. 

We understand that you have concerns.  We try to make our investment decisions on facts alone, but we understand on the other end of the portfolios that we manage are people; people with concerns, possibly anger, certainly questions.  We want to be a resource to you when any of that comes up.  Please do not hesitate to reach out to us.


As we mentioned in the letter that went out last fall, we took a preemptive strategy by making portfolio adjustments last year to reduce volatility and correlation in your portfolios.  This is how can we keep your portfolios from being tied to what’s happening overall in the market.  While it may not feel like it as you watch your portfolios balance bouncing around, this was a successful maneuver that has limited the freefall that all-equity investors have seen over the past couple of weeks.  It is also important to keep in mind that even the most aggressive portfolios that we manage were not sitting in all stocks.  The majority of our client portfolios are either built with a conservative or moderate risk tolerance.  As a reminder, that breaks down to being only 31% stock for conservative investors, and 46% stock for slightly more moderate investors.  The rest of your portfolio is made up of cash, bonds and alternative investments that are designed to buffer this movement as much as possible, while being cognizant of not wanting to take away all the positive attributes of stock (which there are plenty, even in times like this when it doesn’t feel like it.)


We understand that part of the reason that you have invested/saved in the first place was to ultimately spend your nest egg.  Whether you are forced to take out your required minimum distribution or we have worked with you to set up recurring distributions, we have plans in place on how to ensure that you are receiving needed cash with as little disruption as possible.  How and why have we done this? First, the reason that we create a systematic liquidation strategy is so we aren’t selling depressed holdings at inopportune times.  We know these positions should rebound over time and we want to allow them to stay unscathed to return to their original levels.  So how do we determine what to sell when you need funds in volatile times like this?  In a nutshell, we have organized your investment positions around criteria such as the type of investment it represents, and how correlated it is to the equity markets, among other criterion.  Based on this ordering, we can sell what is needed without causing your portfolio to unintendedly become more or less risky than you are comfortable with.


As is the case with any shock like this, the overall effect that COVID-19 can have on the economy cannot be determined, regardless of what you may hear on the world news each evening.  There will be plenty of prognosticators telling us of an impending recession, possibly even depression.  For now, we have to take this one day at a time, one shock at a time.  For now, what is frightening markets is related to the COVID-19 and the oil supply issues, especially in the Middle East and Russia.  As all pandemics and other viruses that we have seen over the years have done, this one too will eventually run its course.  For now, we can only act on what we know.  Until we receive opposing data, we must work on the knowledge that the economy is still fundamentally strong.  With that guidance, we have no other assumption, other then, much like the virus, this pandemonium will run its course, too.


Until then, please keep in contact with us regarding your thoughts.  We have appreciated seeing most of you over the last couple weeks in the office during tax season.  We look forward to when we will be looking back on this time (probably not fondly), as we are sure you will do as well. 








Ryan Flanders, CFA

Investment Advisor