Blog - February 27, 2020

Addressing Recent Market Volatility

Our team has been monitoring the coronavirus developments for several weeks. As the story unfolds and the virus continues to spread, securities markets have taken notice. Stock markets materially declined on February 24th and 25th as investors became worried. These market selloffs rear their head every few years – Trump’s election, Brexit, European debt crisis, etc. No matter how short-lived, they are uncomfortable and elicit feelings of concern amongst many investors. If you’re feeling this way, you’re not alone.

Beginning in January, we have had lengthy discussions regarding the coronavirus outbreak. We have decided that portfolio changes are not advisable. For information to be relevant to investment decisions, it needs to meet two criteria. First, it needs to be important, in that it must have a meaningful economic impact. Certainly, the coronavirus is important for global economics. GDP will likely experience a contraction in the first quarter and perhaps beyond as transport, travel, and work are impacted in major parts of the world. Second, information needs to be knowable in advance. We simply can’t anticipate the spread of the current outbreak; it’s unpredictable and there is little we can do to improve our insight into the virus’ path. Without that information being knowable in advance, portfolio changes would be a coin flip – and that’s not how we make investment decisions. If the virus gets worse, the economic impact will get worse in the short term. That will hurt stock markets. However, future global economic growth will continue in the long term.

We have always advised an appropriate and reasonable mix of short- and long-term investments in client portfolios. Money that may be needed in the short-term is placed in safer investments, while money that is invested for the long-term is placed in investments that may experience more volatility, like we are seeing now.

While we wait for this to settle, the current market climate is not all negative. For those of you who have been holding back with cash on the sidelines, we are actively watching for solid investment opportunities as the situation progresses.

We have been conservatively positioned in portfolios so far this year – providing additional safety. This does not mean you won’t see negative results in the short term – you will – but this does not change our long-term investment plans.

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