The Lowry Letter®

Week of 3/3/2020

We’re going to focus this week on the key issue on many minds- the recent market declines due in large part to the spread of the coronavirus (COVID-19).

We read: that this is the 26^th correction of at least 5% since the March 2009 stock market low. Each of those declines was related to legitimate fears about the market did not persist in the face of continued economic growth (source: BTN Research.

We enjoyed: Monday’s bounce, but recognize that further declines are likely to occur as the virus spreads. We find Brad McMillan’s perspective to be helpful. A great excerpt:
As investors, we also need to consider two final points. First, even though stock markets are down, bond markets are up. For a diversified portfolio, the drop is material but not nearly as bad as the indices themselves. Events like this are the reason we diversified in the first place.
Second, unless you need the money immediately, a drop (even a big one like we are seeing) and then recovery are just part of the normal ebb and flow of markets. We have seen this pattern many times before, most recently at the end of 2018. Of course, market declines are always a surprise and always scary. Over time, however, the fundamentals reassert themselves, and growth resumes

We read: about how we still do not have a good handle on the actual mortality rate of COVID-19. Data from China may not be reliable and many cases may not have been counted due to minimal symptoms. The truth is that we will not know the real story for some time.

We recommend: this reminder of hand washing best practices. Always a good practice to reinforce!

Q: Should we consider any changes to our investments given the virus situation ?

A: The key question is whether your portfolio is aligned with your specific goals. We spend a lot of time in our client meetings on the question of risk tolerance and risk capacity, and so generally the portfolios we manage have the right allocation. As with other declines, the current situation represents an opportunity for long-term investors to take advantage of the reduced risk tolerance of others.

Moreover, the decline in the last week was so rapid that reducing stock exposure at this point would mean locking in losses and probably being out of position when things improve, as shown by Monday’s huge upward move.

The virus has and will have an impact on economic activity this year, and maybe into the future. This highlights the need for good financial management, including an appropriate cash reserve and a low debt burden .

Advisory Services offered through Lowry Financial Advisors, Inc., a Registered Investment Adviser. Securities and additional advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Advisory services offered through Lowry Financial Advisors, Inc, are separate and unrelated to Commonwealth. Lowry Financial Advisors, Inc. is located at 12921 SW 1st Rd, Suite 215, Tioga, FL 32669. 352-333-7990

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