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Response to Recent Market Volatility due to Coronavirus

Response to Recent Market Volatility due to Coronavirus

March 11, 2020
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I'm happy to report that the portfolio changes we have made over the past year are paying off. As we had mentioned before, we have been more conservative in our overall portfolio. Our stock exposure is lower than typical, and we have been favoring higher credit quality bonds and low-volatility stocks – all of which has provided more stability during this historic period of high volatility. Our substantial allocation to U.S. treasuries has risen as the stock market sold off in reaction to the spread of COVID-19. Our overweight to defensive stocks has also helped maintain portfolio stability.

COVID-19 is expected to continue its spread in the short-term. Oil markets are reacting strongly due to a significant drop in global trade and travel, but OPEC’s failure to agree on a production cut sent oil prices sharply lower. Earnings forecasts for tourism and brick-and-mortar retail have low expectations as people avoid population-dense spaces, while manufacturing forecasts expect a similar slump due to supply chain disruptions.

Unfortunately, this is causing some larger economic issues that may persist and have a more prolonged impact than prior outbreaks - economic slowdowns, unlike swings in the stock market, no matter the cause, always take time to recover from.

If your personal circumstances have not changed significantly, we recommend avoiding any drastic changes at this time. We also recommend being conservative with personal spending; consider delaying any major discretionary expenses and evaluate refinancing any debt to take advantage of low interest rates. Otherwise, we would go on with our normal lives, take care of our families and communities and know that we will get through this difficult time.

We are here for you and always available to help.