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What We’re Hearing, Recent Portfolio Adjustments, and a Thank You

We hope you’re holding up after what may be the first true week of social distancing for many. We continue to communicate with our investment partners and want to keep you informed about what we’re hearing and what we’re thinking. Today’s message is based on our notes from a recent call with the Founder & CEO of Blackrock, Larry Fink.

  • Experts expect new infections to peak in the US by the end of April, with another 6-7 weeks of declining infections after that.
  • Overall, this is a 4-5 month issue (China was 10 weeks but it will take longer in a democratic society).
  • If you believe this is a 4-5 month problem, then don’t run away from the world of investing – these are opportunities you would have dreamed about weeks ago.
  • A huge insurance company is readying to rebalance out of bonds into equities (from his conversation at the White House).
  • A foreign company came in yesterday and said they want to invest a lot more now in equities.
  • Pension funds are in the same mindset - he is stressing it’s time to “jump in” to close the gap on their funding deficit.
  • A scare from more negative news related to the rising infection rate could bring the market lower in the short term – but we should expect this after seeing what happened in China/Italy.
  • From his conversations with business leaders, their goal is to keep employee morale high and to preserve the business over the next 4-5 months so they can participate in the rebound.
  • His closing thoughts:
    • Corrections are good over the long run, as they wipe out the leverage in the system.
    • Blackrock has had very little in terms of redemptions:
      • Mostly through leveraged hedge funds and leveraged companies that were in the wrong positions.
      • Leverage is exacerbating the problem – core investors are not big sellers (a little more in recent days).
    • Focus on the long term and be opportunistic.
    • There’s no way to call a bottom, but valuations are low over a long horizon – these are good opportunities!
    • This is the time to start adding risk, not to start running away.
      • Thrive Note: We know it might not feel that way!
    •  “Unless you HAVE to sell now – my strongest words to all of you – if you’re nervous now and want to sell, go have lunch with your spouse” (Thrive note: If you’re still talking to each other!)

 
When working with you, we always stress the importance of focusing on the things you can control. Along those same lines, we acted to rebalance Client portfolios this week in line with your strategic asset allocation to ensure you’re properly positioned. This involved selling bonds that have held up in this downturn in order to buy stocks at depressed levels.

We also wanted to take this moment to applaud our family of Clients. It’s easy in times like these to lose your cool and to feel the need to take action – any action – to feel better. On the contrary, and almost universally, our conversations with clients have proven that you believe in the planning we’ve done together and understand that downturns are part of being long-term investors. We appreciate your positive attitudes on these calls and your continued trust and confidence. Financial success only results from a strong partnership and we can feel that on our calls.

We hope you have found our communications – both phone and email – helpful and timely. We’d love to hear your feedback or about topics or areas of concern that you’d like us to address.

Stay safe. Stay healthy. Stay Sane.
Thrive Wealth Management