In a crisis, the market goes through phases of denial, realization and exaggerated responses. The question about the current Coronavirus crisis is, "Is this a temporary phenomenon or is it creating a structural change in the global economy?” The key unknowns are the severity and time frame of the virus, and from our view, whether this sends us into a recession. If yes to recession, then you must judge the severity of the recession and the investment opportunities that recessions present.
Even if this is only a “temporary phenomenon”, and we remind everyone to stay laser focused on long term goals, we know from experience that human nature will want “action taken”. Remind your friends that the appropriate action may not be that you sell all of your stocks and sit in cash with historically low interest rates. In times of temporary crisis, action may involve more subtle nuances to reduce overall volatility in your portfolio. It may involve paying closer attention to the rate received on cash holdings particularly in light of the feds recent 50 basis point cut.
For Quartz, it means doing all of those and still reducing volatility by selling small percentages of the most volatile portion of the portfolio during Monday’s record point bounce back. It most definitely involves remembering how well your portfolio performed in 2019 and taking a broader view of your recent performance. It means maintaining discipline with existing bond ladders, remembering that the bonds we already own have become much more valuable over the last few weeks from a price standpoint as well as a strong buffer to volatility.
Last, but not least, it means staying vigilant and present for the Quartz Family. As many of you know, we were scheduled to attend an elite advisor conference in Los Angeles next week. While these events are excellent venues for expanding dialogue with other industry leaders, we examined the risk and determined it was in the best interest of Quartz and our clients to forgo our participation and stay in Austin.
As always, if you have questions, we are here for all of you.
David and Shane