Dear Clients and Friends,
From its previous high, the Dow is down 10% in a very short period of time. We are officially in correction territory, and the Coronavirus is obviously the spark that ignited this fire. However, the ground has been damp with gasoline for a while now, as the markets were fundamentally overvalued. Accordingly, we have been reducing risk in clients’ portfolios for the past 6 months. This is extremely important to understand because we have already reduced stock market exposure, and thus expect client portfolios to drop less than their relative benchmarks, and meaningfully less than the stock markets.
For those of you wondering if we should sell out, the answer is a resounding “No!” Discipline is tested during times of uncertainty. Client portfolios are built to weather a recession, during which the market could drop 4 times the decline we’ve seen over the past week. As I said above, we are already less exposed due to allocation adjustments made during the second half of 2019.
For those asking if this is a buying opportunity, the answer is “not yet.” There is still too much uncertainty, and we expect the markets to drop further before they revert to an upswing.
That said, we expect to find a buying opportunity at some point, albeit not yet, because no matter how bad the virus gets, we are certain that the markets will overreact. If the Dow deserves to be down 3%, it will likely be down 10%. If it deserves to be down 20%, it will likely be down 40%. This type of over-selling creates buying opportunities, and because we had moved part of our portfolios out of the stock market last year, we have plenty of money available to redeploy when the time is right.
Regarding the severity of the virus, let me provide some context for you. During the current influenza season, there have been 15 million cases, 140,000 hospitalizations, and 8,200 deaths. Compared with the average flu season, currently, the coronavirus does not even register. We expect the situation to worsen, and we are anticipating an outbreak of some level. But in the U.S., so far, the damage has been minimal. Globally, the Coronavirus continues to spread and will have an impact on the economy. However, most projections are not expecting these to be cataclysmic. The fear, of course, is that the virus may not be able to be contained, and will quickly spread into a global pandemic. Hence the dramatic drop in the investment markets.
Before we wrap up this brief message, I want to take a moment to recognize the human factor of this virus. As your financial advisers, we have focused this message on money, investments, and wealth. But the horror of the coronavirus is not the stock market. It’s the human suffering. Let us all take a moment to reflect on what’s important in life: The health of our family and friends. There will likely be an outbreak in the U.S. Hopefully it will be contained, but we should be prepared nonetheless. Focus on your loved ones; we will take care of your portfolio.
Have a lovely weekend
-MOR Wealth Management
Matthew Ramer, AIF®
Principal, Financial Advisor
MOR Wealth Management, LLC
1801 Market Street, Suite 2435
Philadelphia, PA 19103
P: 267.930-8301 | c: 215-694-4784 | f: 267.284.4847 |
601 21st Street, Suite 300
Vero Beach, FL 32960
P: 772-453-2810
matthew.ramer@morwm.com | www.morwm.com
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