As I’m sure you are aware, stock markets around the world have been reacting violently to concerns related to the spread of Coronavirus, uncertainty about its impact on the economy, unknown timing about when the crisis will end and the serious health risks involved.
At ODCM, our primary concern during a crisis is for the physical, emotional, and financial safety of our clients. An important part of our wealth management relationship is to be available to hear client concerns about market events like we are experiencing right now and to provide a historical perspective to put significant daily market moves into the appropriate context. With that in mind, here’s what we have been doing, investment-wise, with your accounts:
Our investment committee is meeting daily. We are carefully monitoring the situation and have made a few, relatively minor, adjustments. In mid-March, we sold our position in the Double Line Total Return Bond Fund, which had done well for us since we bought it. Now that our economy appears to be slowing down, however, we decided to sell it, while it was up. The fund owned a number of mortgage-backed securities which we feel could very well underperform as the economy slows and people have trouble making their mortgage payments. We have also sold a few stocks in order to re-align portfolios and, in some cases, bought new ones. We feel that, very likely, the volatility will continue, at least until after the election, so we are now deliberately holding cash, both for downside protection and to use when buying opportunities arise.
When there are significant downward moves in the market, try not to be alarmed. We would view these moves a buying opportunities and will be ready to capitalize on them when they occur.
It is critical to understand that market corrections (down 10%), bear markets (down 20%), and economic recessions (at least two consecutive quarters of negative growth) are included in our investment and financial planning assumptions. Many of our clients have seen Monte Carlo simulations about how their financial plan will fare in a wide variety of circumstances, covering at least 1,000 tests based on historical data, including bear markets and recessions. A scenario like we’re in today is included in these simulations when your “Probability of Success” is calculated. In addition, for clients who rely on cash flows from their portfolio to support their lifestyle, please remember that your next several years of cash needs are covered regardless of what’s happening in the stock market.
Most importantly, we would like to know how we can help you get through this unprecedented world event. We are well equipped with video-conferencing capabilities and are happy to have virtual meetings with you and anyone you care about to see if we can help. Do not hesitate to let us know how we can make you feel better about where we are today.
In this ever-changing world, please do your best to stay safe and healthy and, since you have plenty to worry about, let us worry about the markets. That’s the least we can do for you.
The Team at Old Dominion Capital Management