"To have compassion for those who suffer is a human quality which everyone should possess, especially those who have required comfort themselves in the past and have managed to find it in others.”
Giovanni Boccaccio from The Decameron, giving us great advice during this time of national difficulty. You may be having flashbacks to your last literature class, but we felt this to be an appropriate way to begin the newsletter today. The Decameron was written as a collection of stories told by 10 people in 14th century Florence. The city was overrun with the bubonic plague and those 10 sequestered themselves in the countryside for two weeks and told stories to entertain themselves. As the United States begins to sequester itself we remember that plagues and pestilence were once a common occurrence in human life. We are thankful for all the progress that has been made over the centuries that something like COVID-19 is now considered an epidemic.
We at Executive Wealth Management have been through this type of market before. We were founded in 1985. We saw the crash of 1987, the recession of 1991, the dot-com bust, the global financial crisis, and many -15% to -20% drawdowns in between. Though past performance by no means dictates future returns, we have seen all this and we built a process that does dictate how we deal with difficult market conditions like this. We are following our process. It bears repeating that nobody knows how all of this is going to play out. We can all have our best guesses, but those are strictly guesses. The market seems to have priced in a deep recession in the course of three weeks, without data but with fear. However, the market is not always omniscient. Volatility is a natural response to situations like this which is why we work hard with you to figure out your ability to take risk, but also to trim risk as market situations mandate.
Over the course of the last few weeks our process has had us taking defensive measures as the market ticked down through our pre-determined trigger points. Below is a short list of some of the moves we made.
- We made the first of our defensive moves by taking a minimum volatility equity position in our Tactical Asset Allocation Models.
- While not eliminating equity exposure this move was intended to dampen the volatility of moves in the equity market.
- Opportunity models begin to get defensive with the Global less than 50% in equities.
- Move to a neutral equity weighting in Tactical Asset Allocation models
- Trim US Small Caps, Developed International Equity, and Emerging Markets Equity.
- Trim equity exposure to US Growth Opportunity.
- Trim High Yield Bond exposure in Focused Income.
- Trim equity exposure across all Equity only models.
- Trim more equity exposure in Asset Allocation Models.
- Trim more High Yield Bond exposure in Focused Income
After the drawdowns are done there will be buying opportunities. We are prepared to use our process to get more invested when the markets turn around, as they eventually will.
In the mean time please be sure to stock your pantry appropriately. But just as important make sure that you have things that make you feel good and hopeful during this time. Be that a pint of ice cream, chocolates, a nice bottle of wine, or a favorite old movie. Take time to reflect on the mysteries of life and enjoy those around you.
Please feel free to call me, this is not an easy time but together we will make it through.