We want to proactively communicate with you about the market movements of the past week. In doing so, we thought it might be helpful to remind you of a few of our guiding principles in managing your wealth.
- First, although non-professional investors may think this seems counterintuitive, periods like this are when it’s important to sharpen our pencils and seek the best opportunities the market is providing us. You can be confident we are doing so on your behalf and, where appropriate, you’ll likely see trades reflecting our decisions.
- Second, our outlook is always focused on the long-term. We view this as a true competitive advantage where we can take advantage of short-term market gyrations to profit on your behalf. Stocks are on sale and while they may continue to go lower, we’re confident that any capital we put to work now or in the coming days and weeks will prove to be good investments in the future.
- Third, as we’ve said in several commentaries over the past few quarters, we have been emphasizing both offense and defense in the management of your portfolio. We have been carrying higher levels of cash for some time now with the intent of capitalizing when the market provides us with that opportunity. While the market is only off about 10% from its all-time high, we are beginning to see several attractive opportunities in individual names.
Our training enables us to objectively look at the facts and circumstances and invest accordingly. As prudent investors, we have spent considerable time evaluating the current investment environment. A confluence of factors are driving the markets.
- First, Coronavirus. We are monitoring these developments closely and, while much uncertainty remains, it looks as though the virus will, at least in some way, hit the United States more broadly. We are evaluating our exposure to companies that are levered to an economic slowdown precipitated by a potential pandemic. While concerning, at this point we do not feel the panic-driven commentary shared by the news media is an accurate representation of the severity of this health crisis. We will closely watch the response by the CDC and are taking it seriously, but panic is not an investment strategy.
- Second, Interest Rates. Interest rates have continued to fall, representative of the bond markets view of the economy and a potential slowdown. We have been observing this for several weeks and believe the equity markets are beginning to catch-up to this notion in pricing in slower economic growth, now exacerbated by the coronavirus.
- Finally, the Election. Over the next five or so days will start to have more clarity as to who has a clear chance to win the Democratic nomination. While the race may go all the way to the convention, the markets are beginning to form an opinion on Trump’s potential challenger. We just expect more volatility as this uncertainty turns to clarity.
In summary, as stewards of your hard-earned capital we are closely monitoring and discussing the markets on your behalf. The confluence of factors are not reason for panic but rather for prudence and objectivity. We are exercising both. Market pauses like these are why you have a trusted team in Greenwood Gearhart working on your behalf. And, of course, you can be confident that our own capital as well as that of our family’s is invested right alongside you, a rarity in today’s world.
We, of course, welcome your calls, questions, or concerns and, as always, appreciate your trust and confidence.