Market Perspective for March 23, 2020

The markets have been awaiting further government intervention to reassure our citizens are protected as millions are being required to stay home.  The markets continued to decline, though the Nasdaq limited losses to 0.27 percent.

We want to reiterate that the market decline has not been caused by mismanagement of large corporations or a systemic problem in our financial markets.  This is an external event that leaves no company unexposed.

We are in a very rapid recessionary decent.  Still, we believe that the rebound will be equally impressive.  Volatility will remain high and daily fluctuations will be dramatic.  If you had a competent financial plan at the beginning of 2020, this is not the time to liquidate your portfolio.  The greatest risk investors face now is not further downside risk but missing the upside potential over the coming weeks and months.

Over the next month, GDP will slump, historically low unemployment rates will immediately reach historic highs. Our national debt will balloon.  The news will not be good.  Until we see a decrease in new COVID-19 cases, followed by government assurances we can interact with each other in public, concerns will remain.

Sometime over the coming days, we expect the United States Congress to pass a drastic and necessary stimulus package.  This should provide a short-term boost to not only workers and businesses, but for the stock market.  Even if you are considering changing your allocations, we believe it is best to wait until the stimulus bill is passed.

On a positive note, the Federal Reserve introduced new programs to support markets today. In addition to open-ended quantitative easing, the Federal Reserve will also create a “Main Street” lending program to make sure small businesses have credit access. Federal Reserve also reintroduced the Term Asset-Backed Securities Loan Facility (TALF) to help the flow of credit.

We expect a pickup in growth during the 3rd quarter.  Solid, well capitalized companies with stable balance sheets will outperform when the market turns.  Investors will not make speculative bets.  Our preferred positions, including Vanguard Dividend Appreciation and iShares Edge MSCI Min Vol USA ETF (USMV) have declined less than the market and will outperform once stocks rebound. Both funds are very inexpensive, have excellent diversification and have outperformed more than 89 percent of their competitors.

Companies that used buybacks to improve their stock prices should be avoided. Focus on balance sheets, strong management and long-term viability.

At Mutual Fund Investor Guide and MDS Wealth Advisors, we are fully prepared to continue operations in the event further restrictions occur. Our technology allows us to work remotely, serving you without interruption – the exception being that you may hear young children or dogs in the background during our calls. We hope this is not a reflection of our professionalism but rather a reality of what we need to do to ensure our staff are safely with their families during uncertain times.

Our business operates in a small college town in northwestern Massachusetts. As colleges and schools have made unprecedented decisions to close and state leaders have placed restrictions on restaurants, gyms, entertainment and activities, it is important now more than ever to support your local communities. Even in large cities, if you have the means, embrace the businesses that we may have taken for granted over the years. They will need all our support to get through the coming days.

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