Navigating the Market Decline
In light of the continued volatility in the investment markets here's a quick summary of what we're working on to help you navigate this situation successfully.
1.Review of current investment strategies
We regularly review the performance and composition of everyone's accounts, and that process get's stepped up during periods like this. Here are some general numbers on how different investment mixes have performed this year (through Friday) and in 2019:
For reference, the S&P500 was down -8% YTD through Friday, and the international stock markets were down about -11%. But bonds were up +4% YTD, showing once again how diversification works to smooth volatility.
2.Review of investable funds
We have done a top-to-bottom review of all of your accounts to look for investable cash. Declines like this are disconcerting, but ultimately can present fantastic opportunities. We want to be ready for that, and we'll be in touch when the time looks right to talk to you about this. (PS if you have investable cash outside of your SEI accounts let us know)
3.Review markets for opportunity
During uncertain times successful investors have the ability to set aside the hysteria and fear and look objectively for opportunity. Warren Buffett, probably the most consistently successful investor over the past 40 years, once said "Buy when others are fearful and sell when others are greedy". There are very compelling opportunities emerging in some markets, things we haven't seen since the Financial Crisis, and we'll be sharing those ideas with you when conditions stabilize (our approach errs on the conservative side, we'd rather wait for signs of things bottoming out and buy then rather than try to time the bottom).
I've read and heard a lot of opinions/forecasts from hundreds of the best strategists over the past few weeks, and the outlooks vary widely. At this point, the one that seems most probable goes as follows:
· the first half of 2020 is horrible for corporate earnings as many economies have ground to a halt-- arguably markets are now reflecting much of this
· the spread of the coronavirus slows through the Spring, and business recovers in the second half of the year--following on the trajectory of past SARS/MERS outbreaks
· some industries (cruise lines, airlines, hotels) will have a permanent loss of business from this period (ex. customer cancels a cruise and doesn't necessarily re-book it in the future)
· many industries will have a temporary loss of business (ex. customer doesn't buy an iPhone because supplies have been impacted but they will still buy the phone when things normalize)
· odds of a recession have risen from 20% to 60%, and depending on how long the coronavirus spread continues the odds may rise
· the underlying economy was strong, and it's possible if the Fed cuts rates even more and the virus does not linger through summer that the markets could have a strong rebound later this year
Lastly-- a note from Italy
Thought I'd share this email we received from friends in the Milan area, given the above logical assessment of the markets please don't think I'm not concerned about the well-being of everyone and the severity of the situation. Stay well!
We all (Giuliano, Sara, my parents and sister, Sara's mother and relatives and friends in general and I) are fine: none has been infected (yet?)...
As always, please don't hesitate to call or email if there's anything we can help with.