As we briefly highlighted a few weeks ago, as the equity markets began to sell-off, we continue to monitor the economic turmoil and remain confident that global markets will recover from the economic uncertainty that we are facing with COVID-19 (Coronavirus). As we have told clients in the past, volatility and economic/political uncertainty is very normal in financial markets and it’s important to not overreact and panic. It is very normal for investors to feel like this time is different as we go through a correction. While the circumstances driving each are always different, one thing we know is that we eventually emerge, and over time, the markets continue to move higher.
Of course, we are closely following all the headlines and like everyone else don’t know how long this will persist; but what we do know is that the underlying US economy appears strong and the financial system is well-capitalized. We are still in the early stages of truly understanding the full economic, financial and social impact to our economy and globally. There is no doubt at this point that global GDP will slow, but we remind clients that the market is forward looking and already pricing this in to some extent. That said, the possibility of more downside is very real, and the bottoming process may take a while.
We are closely monitoring client portfolios and will adjust as new information becomes available, but we are not in the business of timing markets and calling tops/bottoms. Each of our clients are allocated based upon the plan that we set in place for them and we do not believe it’s a time to deviate from that by either dialing up risk or by bringing it down significantly. With the range of outcomes being so vast, we feel it best to stay the course. It’s not time to sell but it’s also not a time to ditch your bonds and cash for stocks.
We are hard at work trying to identify how we can use this downturn to our advantage: tax loss harvesting, buying great companies at steep discounts, & shedding exposure to areas of the economy that we view as being unstable, such as Energy. You have heard us harp on the importance of diversification and periods like we are currently experiencing are a reminder of why it is vitally important. Our bonds and other diversifying strategies have performed quite well over the last few weeks.
As always, we are here to answer any questions and be a resource. Please feel free to reach out at any time.
Sincerely,
Canal Capital Management