Market Update November 2020
Let’s imagine we went back in time to the beginning of 2020, excited about the fresh promise a new year brings. What if at that time, someone handed you a crystal ball and you learned this:
That a pandemic would start in February, requiring extended periods where large portions of the world were required to ‘shelter-in-place’
That economic activity would subsequently fall dramatically and unemployment would reach levels not experienced since the Great Depression
That businesses that serve customers face to face such as restaurants, movie theatres, and airlines would be devastated with most losing the greater portion of their revenue.
Presuming you had that information in advance, what might you have considered as the right thing to do with your portfolio?
You could have taken advantage of a few common strategies for benefitting from a falling market – sell everything and invest it all in cash, buy secure government bonds or maybe even have used a complex strategy to ‘short’ the stock markets. All of which would have seemed like reasonable options to weather the storm, but those options would not have been in your best interests’ long term.
Why? Because that crystal ball would only have revealed some key information, but not all, such as:
That stock markets can continue to march up the hill despite the economic realities.
That governments would provide massive stimulus in all major economies.
That even when world events would lead one to presume that the markets would react in a specific way, the markets can sometimes end up acting in the opposite way.
It is important to remember that we must accept the market as it is and take a disciplined approach while making decisions with all the facts as they unfold.
Here’s what we are doing:
We are continuing to manage your asset allocation especially during volatile times like these, whether they are upturns or downturns.
We are making sure we carefully choose individual holdings that pay income whether through dividends, interest or distributions.
We are ensuring that you have cash available for emergencies, income or buying opportunities if and when they arise in a falling market.
Doing all this will over the long term provide you with the same expected returns to meet your goals with minimal risk during volatile markets like these. That is what our strategies do, that is our process.
With that, we continue to stay invested in the markets, but in a careful manner. Process in these times matters more than ever. We continue to follow our process that has seen our clients’ life savings through good times and bad.
Our main goals continue to be – preservation of capital, investing for income and a reasonable rate of growth to meet clients’ needs over their lifetimes.