Pandemic Investing Update

Greetings Clients:

I write to discuss how we are managing your assets through the pandemic and to share some of the adjustments that we will be making to your portfolios.

What a year. We started 2020 with record-low unemployment before the pandemic pushed us into the most severe recession in history. Then the greatest monetary and fiscal stimulus ever enacted reversed the contraction and made our recession the shortest in the past 100 years. Now we await the impact of the recent expiration of expanded unemployment benefits while coronavirus cases continue to spike in many parts of a deeply polarized country approaching its next presidential election. The forecast calls for volatility, which is an opportunity for gains as well as losses.

Chief Allocation Strategist Steve Bobo and I have diligently followed our investment methodology:

  1. Know the timing of cash needs;

  2. Build globally diversified portfolios with low-cost index funds and augment with high quality stocks and active strategies to mitigate overweights, reduce correlation, and protect against unexpected consequences;

  3. Make continuous, small, and incremental adjustments; and

  4. Review portfolios frequently and rebalance to targets to take advantage of volatility (BUY LOW, SELL HIGH).

We have been working over the past few weeks to finalize our latest adjustments, and we have just approved the following:

  • Shorten duration of US Treasury bonds for higher yield (inverted curve) and hedge against interest rate risk.

  • Trim strategic bonds to protect against potential worsening economic damage and add corporate bonds for possible benefit from pandemic bailouts.

Several existing strategies are particularly well-positioned to benefit from the unprecedented reordering of our world:

  • Maintain small- and mid-cap stock allocations for historical outperformance in early phases of recovery (which might be now).

  • Maintain international stocks for expected outperformance over US stocks: emerging markets stocks have outperformed the S&P 500 Index for the past month and quarter.  Foreign currencies are strengthening against the dollar as Europe unveils a unified fiscal response and reduces its coronavirus cases. This shift in exchange rates will benefit our international investments.

We will continue to assess trends and make moderate adjustments to reduce risk and maximize returns. Significant gains can come from volatile markets, if we remain disciplined.

Please contact me if you would like to better understand how we grow and protect your money. Keep us updated on your cash needs, and we will get you to your goals.

Stay safe, be kind, do your part.

Sincerely,

John Biebel

John Biebel