Q1 2020 Market Recap
April 3, 2020 | The Corbenic Partners Advisory Team
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails” – William Arthur Ward
It is the set of the sails, not the direction of the wind that determines which way we will go. We cannot direct the wind, but we can adjust the sails.
We tend to be realists. Globally we are dealing with a virus, whose impact to our daily lives and the global economy cannot be quantified. Around the world policy makers have taken extraordinary steps to support their respective economies; Central Bankers were quick to provide liquidity to maintain confidence in the credit markets, and the global health system has been mobilizing in a manner that we have not experienced outside of major conflicts. But even with those steps, the duration and severity of the virus’ impact cannot be determined at this time.
Markets hate uncertainty and today we have that in spades. The volatility in the markets is a direct reflection of investors attempting to determine what the financial impact of the Corona Virus will be on the economy and by extension what represents fair value for risk assets. Investors are divided. Some believe the lows for the stock market are in, some believe the lows will be retested, and some believe the markets will make new lows.
Leading into this, the U.S. economy was enjoying a multi-year expansion. Unemployment was low, consumer spending was robust, and investors were confident about the future. Unfortunately, things changed very quickly. In essence, the State and Federal governments over a series of days and weeks began shutting down businesses, limiting the movement of its citizens and effectively grinding major sections of our economy to a standstill.
As March came to a close, investors were faced with the worst quarter in the history of the stock market, the fastest decline into bear market territory, and a period of volatility where 5% swings in the stock market each day became common place. As to the economy, weekly unemployment began to be measured in the millions, debt levels increasing by the trillions, with interest rates going to zero.
However, we were preemptive in mitigating risk for our clients prior to the market decline, primarily by rebalancing and diversifying portfolios in a manner that aligned with their long-term objectives and risk profiles. As the potential impact of the virus and subsequent policies began to unfold, we took additional steps to not only reduce risk, but position our clients to be opportunistic by increasing cash positions. To date we believe these steps have provided our clients with risk adjusted returns that we are pleased with and positioned them well going forward.
Presently, we are attempting to incrementally add exposure for specific individual clients by focusing on quality and stability. We don’t profess to know where the markets will trade or what the impacts of the virus will be. We are long-term investors not traders and our focus remains on building portfolios that balance risk against returns suitable to each family we serve.
Rather than add to the numerous market analyses, we are sharing a few pieces representing some of the most respected strategists. They all don’t agree, in fact many of them have differing views on what comes next, but they offer insightful views based on years of experience.
- Scott Welch You Got to Know When to Hold ‘Em
- Howard Marks Which Way Now
- Scott Minerd The Faustian Bargain
- Mohamed El-Erian Don’t Read Too Much Into Stocks’ Sudden Rebound
- James Montier Fear and the Psychology of Bear Markets
- Goldman Sachs Roaring into Recession
If you have questions, we are available at your convenience and look forward to speaking with you in the coming days.
Some may attempt to make the quick trade or pick the bottom, we won’t. We will stick to what we have done for over thirty years. Manage our client’s money as if it was our own.
Opinion piece, please see important disclosure