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1st Quarter Perspective

1st Quarter Perspective

| April 08, 2020

As 2020 began, investors were hopeful for continued solid returns based on the generous returns of 2019. In a few short weeks, a threat no one could see coming changed all that. The COVID-19 virus morphed quickly from an issue in rural China to a threat to world health and financial stability. Many industries, such as travel and hospitality were forced to close and many small businesses closed their doors to institute appropriate social distancing to help stop the spread of the virus. 

As the number of cases spread to more countries, global stock markets tumbled and several countries announced stimulus packages. The United States passed a broad $2.2 trillion offering relief to individuals, businesses, and state and local governmental entities. Tax filing and payment dates were extended among many other initiatives. Both large and small countries around the globe also passed massive stabilization plans.

This pandemic and the stimulus response led to historic volatility. The average daily change of the S&P 500, up or down, is historically less than one percent. In March, as investors dashed back and forth from fear to encouragement, the average movement per day was 5%. There were few safe havens as all sectors of equity markets fell. By the end of the quarter, the S&P 500 fell 20%. As a matter of perspective, keep in mind that large domestic equities rose dramatically last year, so the percentage drop is relative based on the 2019 gains. Still, while the results so far this year are certainly disappointing, we believe there is reason for investors to have confidence and hope.

As stewards of wealth, we believe that investing isn’t just buying stocks and bonds. It is an investment in the businesses and ingenuity of the United States and the world. Within days of the emergence of the virus, the power of those companies became evident. Just weeks later, a U.S. company announced the availability of a test that can detect whether an individual has COVID-19 within five minutes. Another company is developing a vaccine that might be broadly available in mere months. These are just two of many. The power of people and ingenuity are already fighting back.

Medical technology isn’t the only bright spot. Businesses in technology, infrastructure and communications are also helping get us through this new normal with unrivaled innovation. Not that many years ago, a mandate that most people must work from home would have been impossible and crippling to the economy. In millions of instances, including our practice that serves you, businesses are safely, securely and efficiently working from home.

You can feel confident beyond your portfolio when it comes to our relationship and your long-term goals. Our process for building client portfolios has always accounted for the uncertainty of the world and risks in unlikely places. We believe in prudence and discipline, so we typically diversify portfolios to include lower-risk assets like fixed-income and adequate liquidity for tough markets. Simply put, we design portfolios in anticipation of risk, not in reaction to it.

We appreciate the confidence you have placed in us and are committed to continue to earn it. We want you to know that we are here for you as we have always been. These difficult times have not changed that.

Our thoughts are with those who have been affected by this tragedy; those who are dealing with illness, pain and loss.  Being part of a community means we are present and supportive during difficult times.

Please feel free to contact us if you need anything or would just like to talk. Together, we will get through this.


Sources of data –Wall Street Journal, Reuters, Abbott, Johnson and Johnson, S&P Index. The performance of an unmanaged index is not indicative of the performance of any particular investment. It is not possible to invest directly in any index. Past performance is no guarantee of future results. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Three-year performance data is annualized. Bonds have fixed principal value and yield if held to maturity and the issuer does not enter into default. Bonds have inflation, credit, and interest rate risk. Treasury Inflation Protected Securities (TIPS) have principal values that grow with inflation if held to maturity. High-yield bonds (lower rated or junk bonds) experience higher volatility and increased credit risk when compared to other fixed-income investments. REITs are subject to real estate risks associated with operating and leasing properties. Additional risks include changes in economic conditions, interest rates, property values, and supply and demand, as well as possible environmental liabilities, zoning issues and natural disasters. Stocks can have fluctuating principal and returns based on changing market conditions. The prices of small company stocks generally are more volatile than those of large company stocks. International investing involves special risks not found in domestic investing, including political and social differences and currency fluctuations due to economic decisions. Investing in emerging markets can be riskier than investing in well-established foreign markets. The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Russell 2500 Index measures the performance of the 2,500 smallest companies (19% of total capitalization) in the Russell 3000 index. The S&P 500 index measures the performance of 500 stocks generally considered representative of the overall market. The Wilshire REIT Index is designed to offer a market-based index that is more reflective of real estate held by pension funds.