Message from Jon
As we had expected over the weekend, we heard from the Fed that they were prepared to do whatever it takes to help the economy (the markets). Tuesday, the Fed cut rates 0.50% or 50 bps. 1
At this point, we believe that a bottom is setting in on the majority of equities meaning that risk is a lot lower and washing out at present than earlier in February. That said, we could still remain quite volatile for several weeks while the coronavirus and it's spread becomes contained or at-least an antivirus is announced. The main concerns on wall street seem to center on the net affect of supply chain disruptions and their net effect on earnings and GDP. It would not surprise me if the economy has no real growth in the Q2 and potentially even a negative report. 2
There is no doubt that most investors are feeling weak in the knees and nauseous at this point which I can certainly understand. At the risk of sounding flip or tone deaf to the recent volatility and correction we have experienced these past several weeks, maybe now is a good time to enforce a simple but powerful philosophy to investing that I first experienced while coaching men's basketball in Ohio.
We had just beaten a team in a last second set of free-throws and my comment to a fellow coach was something to the tune of "we barely won by the skin of our teeth tonight" and his comment back was, "a win is a win, nobody cares by how much."
If in your plan, it takes 4% or whatever % growth to cover all of your needs, your wants and your wishes then why on earth are you concerned with out-performing the S&P 500! You should be aligning your portfolio to earn you that 4% on a consistent annualized basis and not worrying about what it takes to earn 5, 7, or 10%. When greed and fear take over, they will ruin your plan every single time.
A couple of newsletters ago I spoke about FOMO (fear of missing out) and how it causes investors to take un-necessary risks with their money because they fear they are going to miss out on some mythical rally in the markets. Whenever FOMO kicks in, you can bet the investor comes to regret it in the end. For money managers, FOMO is usually a good sign that a correction is soon to follow too.
This market volatility will remain high through-out the year in our opinion. Revisit your plan, stick to your family benchmark and cast out any other "benchmark" that you hear about from the media, the news, the colleague or "trusted friend or family member". The conversation of "well our investments have been doing great" is a dangerous one because you never know exactly what details they are referring to.
We are still seeing our data and indications remaining bullish at present despite the recent correction. However, over night, a change in the pecking order of asset classes manifested with Domestic equities leading and Fixed Income advancing into second place followed by International Equities, Cash, Commodities and Currencies. We will be aligning portfolios to reflect any changes to merit in the markets and their underlying asset classes.
Stick to your plan, stay calm and carry on.
Till we speak again, enjoy the warmer weather.
BTW: I will be in Naples the remaining part of the week interviewing a money manager and while I am away, my staff will be in to help answer any questions or set up any meetings you need.
The Virus Becomes the Focus
WEEKLY UPDATE - MARCH 2, 2020
The Week on Wall Street
Stocks fell sharply last week as Wall Street considered how the coronavirus outbreak might influence global business activity and household spending.
The selloff became a correction for the U.S. markets. The S&P 500 retreated 11.49%; the Dow Jones Industrial Average, 12.36%; the Nasdaq Composite, 10.54%. The MSCI EAFE, tracking developed stock markets outside North America, had fallen 6.75% week-over-week by Friday's closing bell.
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