Separating Emotions from Investing is Key to Surviving Coronavirus.

These last few weeks have been a roller coaster. We have been talking to you about what we’re doing and what you can do in this time of uncertainty.

We’re encouraging everyone: don’t let fear rule your finances.

Many of you have developed a financial plan to achieve successful retirements and we’re very thankful that during these times, those plans have helped to mitigate uncertainty.

If you don’t have a plan, we encourage you to think about developing one and putting it in place. Knowing where you are going can help give you peace of mind and confidence, especially in the midst of economic and social uncertainty.

During seasons like this, our focus is to continue reviewing risks and looking for opportunities.


What have we been doing?

  1. Continue to Further Reduce Risk.

    After such a strong market in 2019, we suspected we were due for some sort of correction. That said, we did not expect the coronavirus or a crash in oil prices to move the market to such an extent.

    In January, we started reducing risks in your portfolios. Specifically, we reduced positions in emerging markets, small-cap equities, and intermediate high yield debt in favor of cash and gold.  We had concerns over international growth, especially from China, causing us to cut emerging markets. High leverage and higher credit risk (in part due to the collapse in oil prices first on lower China and air travel, then recently the collapse in OPEC talks with Russia) made us cut positions in small-cap and high yield.

  2. Roth Conversions.

    This might be a good opportunity for some to think about doing Roth Conversions. Converting more shares at lower prices can potentially reduce your future RMD’s once the market starts to recovers.

    As a result, these conversions could reduce your taxable income in the future.

  3. Tax Harvesting.

    Taking down risk in portfolios followed by the market’s subsequent decline has also created opportunities for tax harvesting in taxable accounts.

    This might be a good opportunity to start taking gains off the table and offsetting them with more current losses to minimize or even reduce future tax liabilities in taxable accounts.

  4. Looking for Opportunities.

    This week we are slowly beginning to selectively re-enter the market when the opportunity presents itself and aligns with your goals. We are being patient and not jumping in too quickly.

    We are also seeking to enhance client portfolios in the process. For instance, one shift is to remove individual companies with more exposure to economic downturn and add more diversified investments (individual companies or broader equity baskets).


What might lie ahead?

Much uncertainty remains.

  • Coronavirus quarantines will put economic activity on hold for much of the spring, if not longer.
  • Low oil prices will pressure US energy producers for a while longer.
  • Earnings are likely to decline in 2020.

However, US Treasury yields have collapsed below inflation. Relative valuation for equities, particularly those with sustainable dividend yields, have improved immensely. While their stock prices have cratered, US banks appear to be better capitalized than in 2008.

Valuation has not yet been enough of a compelling argument to boost risk-on assets like stocks and commodities. Yet, when the US economy eventually starts to resume operating at normal capacity with a peaking in Coronavirus cases, we think the market might start to recover on less bad news.

It’s impossible to know when the chaos will end. That said, we are proactive and vigilant.


What can you do?

  1. Stay calm and don’t panic. Stay true to yourself and don’t let your emotions run your financial decisions
  2. Have a plan. If you have a financial plan, lean into it and let it do its job. If you don’t have a plan, now is the time to get one.
  3. Let’s look for opportunities. Tax season is upon us and we are encouraging you to look for opportunities to utilize the new tax code to save on tax liabilities.
    Now might also be the time to think about slowly re-entering the market in small increments.


Thank you for your trust in us as we partner on your financial journey with you.

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