In our last client communication, which we sent earlier this month, we addressed the latest news about the coronavirus, now identified by the World Health Organization (WHO) as COVID-19. Since that time, the virus has spread well beyond the borders of China and has now been identified in over 45 countries, and new countries are being added almost daily. With the spread of COVID-19, the effect on both global travel and commerce have also increased, and along with it, the risk of a more sustained negative impact on the global economy.
In our prior letter, we expressed our view that it was important to maintain a sense of perspective about the COVID-19 virus. However, we also expected that because of the virus’s ease of transmission and increased mortality risk, the impact from the COVID-19 virus was likely to get worse before it got better. Unfortunately, that more pessimistic scenario now seems to have become a reality. And, while there was some good news yesterday from the National Institutes of Health, which announced plans to begin testing a COVID-19 vaccine within the next six weeks, the Centers for Disease Control (CDC) also confirmed what may be the first instance of community spread of the virus here in the U.S.
Therefore, we want to notify you of a list of actions we have recently taken. First, we continue to expect that market volatility will remain elevated, and for this reason, we continue to maintain the gold position in our clients’ portfolios. Second, we have also decided to shift some of our equity allocations to high-quality, government and corporate bonds, which offer both lower volatility and higher yield. We feel this change is necessary as the increased demand for risk-free investments, mainly U.S. Treasuries, has put downward pressure on yields. Third, we have taken steps to reduce our overweight exposure to the technology sector, which we believe is being impacted by virus-related supply chain disruptions in Asia – and especially in key components sourced from China. However, we still continue to favor other technology-related areas such as Fintech and medical devices technology, and we expect this recent market correction will eventually present some excellent buying opportunities.
As we adjust our economic outlook based on new information, we may make additional changes to the investments in your retirement portfolios. However, as is our firm’s policy, we will continue to keep you informed of those changes and the reasoning behind them, and we are always available to answer any of your questions.
Thank you for reading our latest article, and we always appreciate your feedback. If you wish to review the status of your risk profile, which we believe all clients should do periodically, please contact us to schedule a meeting.
Investment Advice offered through Private Advisor Group, LLC, a Registered Investment Advisor.
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