Market Thoughts on COVID-19 and Market Volatility

March 09, 2020
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We wanted to give you an update on our thoughts on COVID-19 and financial markets.

The COVID-19 situation is somewhat unprecedented. We simply do not know how bad, nor how long the economic effect will last. It is our belief that, at least in the short term, there is asymmetric risk in the financial markets with more potential downside risk than upside reward.

For some time now we have been convinced that we are late in the economic cycle and that the probability of a recession was increasing, but not imminent. As a result of this, we have been moving towards defensive holdings – utilities, treasuries, precious metals. As much as we do not try to time markets, we do believe that this COVID-19 situation represents a shock to all economies that could potentially be the catalyst that leads to a global recession. To that end, we are reducing, but not eliminating, our exposure to equities across all client portfolios. While we dislike selling into this market, if we can redeploy efficiently, effectively, and patiently then it will help to decrease portfolio volatility.

Our internal discussions on this topic have been measured and pragmatic. This is not a decision driven by fear, but a proactive move based on what we see going on in the economy and the in the markets. We are subscribers to some of the undeniable truths of markets: markets will go up AND down, 10% corrections are more normal than most people think, and occasional sharp declines occur with some regularity. Market volatility has always been a periodic – and sometimes uncomfortable – part of the investment process that we have prepared for. Our perspective is to look beyond just the next few days and weeks, remaining attentive and tenacious in staying on top of the world news and its impact on the markets.

A quick note on our office preparedness

We want to protect your physical health, as well as your financial health. Our offices are currently open for business and continue to operate normally. We are taking precautionary steps to reduce the chance of contracting or spreading the virus. While we prefer to meet in person, we do not want to put anyone’s health or comfort at risk, and we do have the ability to meet via video conference with clients.

Our technology and business systems are in place and have been tested to ensure we can continue working from a variety of locations. We utilize two factor authentication (2FA) for all our systems, and we employ additional security protocols so that we can protect client data no matter where we work.

Please remember that we are here for you and do not hesitate to reach out to us with any questions or concerns.

Best,
The SVWA Team