Raymond James Coronavirus Call Recap
By: Cameron Diehl, CFP®
Friends – With ongoing concerns about coronavirus dominating daily life in the U.S. and continuing volatility driving markets, Raymond James hosted a strategy call for our clients on Monday, March 16 titled “Black Swan: Coronavirus” with presentations from a number of the firm’s leading experts. They provided, in my opinion, incredibly valuable perspective about what has happened in recent weeks, how it compares to previous market drops, where we may go from here and what investors should focus on going forward.
You can view a replay of the call along with the accompanying slide presentation here: https://www.raymondjames.com/investment-strategy-client-call
A few takeaways that stood out to me are below. If you have any questions or would like to discuss, please don’t hesitate to reach out. We’re here to help.
- Headlines will likely continue to get worse before they get better as testing ramps up. Expect more travel and business restrictions with a number of scenarios still on the table depending on the timing and extent to which restrictions are put in place.
- Prior to coronavirus, the economy was solid and picking up momentum. The wave of shutdowns and social distancing we’re now experiencing could push us into a recession. While we may see a sharp contraction in the months ahead, monetary and fiscal stimulus currently being put in place should help drive an economic rebound later in the year.
- The decline in equity markets has been swift and unprecedented. However, compared to previous declines in 2000 and 2008 there are a number of supportive factors such as more accommodative monetary policy, lower interest rates, more reasonable valuations, healthier corporate and household balance sheets and a stronger housing sector. The average bear market is ~33%. We’re currently down ~30%. There are 50-60% outliers but for these and other reasons our team doesn't expect this to be one of those cases.
- Despite the risks, our team has a resounding belief that at some point we will get past this, commerce will resume and stocks will see new highs. There can be tremendous opportunity in current dislocation if you are able to take advantage and be patient.
- The market decline has already overshot Raymond James' worst case scenario with valuations now below historical averages. Stocks at these levels could be attractive for investors with a time horizon of at least 12-24+ months. Before making decisions, re-commit to your time horizon for your portfolio to help maintain perspective and ride out future volatility.
- Don't worry about picking an absolute bottom. Even toward the end, bear market bottoms can be violent with lots of back and forth and can have V-shaped recoveries. They’re also incredibly hard to time. If you’re a long-term investor you can start to allocate portions of available capital in pieces over the coming weeks / months.
- Finding a bottom in market declines is a process, which we may already be in. It can take some time to build a base, with much volatility along the way. At some point markets will stop going down and trade sideways in a range for a time with still violent moves. At some level, investors will get over whatever has been driving markets lower and start to balance further risks with potential rewards which eventually leads to the next uptrend. We saw this at end of 2001-2002 and 2007-2009 bear markets.
- It is likely already too late to move into sectors that will benefit the most during the current outbreak but there are others that could stand to outperform on the other side.
- The drop in oil prices can be a positive for the overall global economy. Lower oil prices translate into ~$200 billion in stimulus through saved energy costs.
- 90%+ of a portfolio’s return is predicated on asset allocation decisions. It is important to stick to the plan created in calmer times.
- The team ended with “10 things investors should remember” during times of volatility, which I’ve pasted below.
Disclosure: The views expressed in this commentary are the current opinion of the Chief Investment Office, but not necessarily those of Raymond James & Associates, and are subject to change. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results. No investment strategy can guarantee success. There is no assurance any of the trends mentioned will continue or that any of the forecasts mentioned will occur. Economic and market conditions are subject to change. Investing involves risks including the possible loss of capital. Material is provided for informational purposes only and does not constitute a recommendation. Asset allocation do not ensure a profit or protect against a loss. Diversification and asset allocation do not ensure a profit or protect against a loss. Dollar-cost averaging cannot guarantee a profit or protect against a loss, and you should consider your financial ability to continue purchases through periods of low price levels.
