Dear Clients & Friends,
At this point, we don’t have a lot of current news that you don’t already know. However, we’ve been reviewing revenue projections for the US and global economies, and our conviction that the coronavirus will usher in the next recession has risen dramatically. This simply means that something we’ve been planning for is likely to occur sooner rather than later.
While the rampant volatility of the stock markets is alarming and unexpected, in context, we are only about 60% away from the bottom. The average draw down during the last two recessions was roughly 52.5%. As of market close today, the markets are down roughly 30%. So, we have a long way to go. In that light, here are some very important things to remember:
We’ve been expecting a noteworthy draw down; we’ve been writing about it for over a year. Obviously, we were not expecting a health-related global pandemic to expedite it, but we’ve been expecting an economic slowdown, nonetheless.
We have been ahead of the curve by reducing risk since mid-2019, and we did it again two weeks ago. So far, the vast majority of clients are still ahead of their benchmark due to this risk management.
No matter how much less of a draw down vs our benchmarks we all experience, it’s still somewhere between annoying and frightening. We feel it. We worry. And we are watching every minute. As I’ve said previously, no one here is “Asleep at The Wheel” (Great band by the way) And you’ve all seen transactions pass through your account- we are not standing like deer in headlights. Which brings me to my next point.
Yes! We have indeed begun looking for an entry point, and we’ve been looking carefully at industries worthy of cherry picking. We will keep everyone informed of our approach to a re-entry point, but that’s a topic for another day.
Everyone remember that annoying monte carlo probability analysis that we force you to listen to every time we meet for your annual review? You know, the part of the meeting when your eyes drift into the back of your head and you fall asleep? That probability analysis is specifically designed to determine the sustainability of your financial model and financial well-being during recessions. Yeah, they’re boring, but we run them for times like this! We are prepared. You are prepared.
The purpose of this message is to remind everyone that we are following the market diligently, and to remind everyone why we are so obsessed with financial modeling. We may have a long way to go and, even if the market recovers soon, a recessionary hang-over is likely. Most of us have been through recessions multiple times. Discipline will make market drawdowns profitable opportunities. But diligence and discipline is paramount.
One final note. For some time, MORWM has invested in technology allowing our office to operate entirely remotely. It’s all about risk management, right? A week ago today, the entire office staff worked from their homes in order to ensure that our bandwidth was sufficient. (I bet none of you even noticed unless we told you.) Starting today, our office is closed and 100% of our staff will be operating from home for at least two weeks, at which time will reassess the safety hazards of public exposure. We all have multiple monitors, our office phones ring to our computers, business will operate normally. Although I’m told Elizabeth needs a better mouse at home, and I definitely need a new pair of slippers. Kidding aside, we want to everyone to know that we are taking measures to protect the health of our staff in a way that will not impact our daily tasks.
It’s hard to not address the human factor of the coronavirus. Please know that we are focusing on economics and portfolio management because that’s what you are looking for from us. Our sympathies are sincere for those who have been affected health-wise, and anyone who will soon feel the devastating impact of an economy that is grinding to a halt - like servers in restaurants, taxi drivers, ticket agents at sporting events. Many of our community members are going to feel much more pain than the drawdown of our 401ks.
In the meantime, stay safe, take care of your family, and we will take care of your portfolio.
-The entire MORWM staff.
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 The majority of this content was written and distributed MOR Wealth Management, all rights reserved. Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a registered investment adviser. Fixed insurance products and services offered through CES Insurance Agency.