As states have moved to ease the lockdowns which have cost tens of millions of jobs, a safe return to normal life without a vaccine has taken time.
In South Korea and Germany, countries that were among the most effective at controlling initial outbreaks of Covid-19, have been hindered by new flare-ups. While the virus is still present, America is continuing to reopen the economy.
If and when vaccines start to work, the next crucial step will be distributing them widely enough to rein in the Coronavirus so that social and economic life can continue down a positive path to a new normal.
Progress and setbacks in the vaccine race will continue to have positive and negative effects on stock market prices each day and week. We continue to increase our exposure to the healthcare sector to help take advantage of positive movements as Covid-19 plays itself out.
Investing into individual stocks in the biotech industry has substantial risks as those stocks could experience steep declines if their attempt at developing a Covid-19 vaccination falls short.
The FDA has the ability to issue emergency-use authorizations during public health crises to allow the use of unapproved medical products which could potentially be an unapproved vaccine.
If a vaccine comes to a fruition, whichever company that would bring a vaccine to the market first, will most likely will not be the last. The first vaccine might not be the best, and many scientists involved in the race for a vaccine say that making enough of a vaccine to inoculate the world is beyond the capability of even the largest drug maker.
The economies around the world are just beginning to emerge from the Covid-19 crisis. The pandemic is probably far from over, and the last 10 weeks have shown the importance of staying the course with a financial plan and diversified investment portfolio.
The markets have been vulnerable to pullbacks after the main benchmarks managed to retrace much of the losses suffered in March. More aggressive Fed interventions may keep the stock market bottoms higher, and low interest rates and more innovation can boost the tops.
Timing the markets historically has proven to be dangerous; however, time in the market has historically proven a successful course of action. We will most likely continue to see different levels of volatility during Covid-19, and it has never been more important to focus on the long-term of your financial plan which is coordinated with your short-term needs and objectives.
We will continue staying the course of your financial plan and being proactive to make specific strategic moves in the portfolios that have proven necessary during these times. 2020 has been an abnormal year, and we have made more updates to our portfolios in the first 5 ½ months of the year than we have done in the previous 24 months. Our reduction in the exposure of the energy sector earlier this year, the reduction in the allocation of small and mid-cap companies and real estate, along with the moves to additional exposure to large and technology companies have been additive to the portfolio. These were all lateral moves in which we did not time the market, as these were moves made within the market.
Regarding the fixed income portion of our portfolios, we continue to stay the course with a combination of investment grade corporate bonds and a total return fund that has the flexibility to invest in different segments of the bond market. In March, we removed our exposure to emerging market debt and added those monies back into U.S. corporate bonds. While we believe that short-term interest rates will be held close to zero for years to come, there are still opportunities in the bond market that provide return, diversification from equities and add value to the portfolios.
We want you to continue to consider the following:
1. Revisit Your Investment & Financial Planning Objectives: For nearly all investors, longer-term objectives are made possible when taking an appropriate level of risk.
2. Continue to Maintain a Longer-Term Mindset: Avoid letting recent market volatility convince you to abandon your prudently designed, long-term investment plan. Short-term reactive decisions could significantly impair portfolio returns.
3. Excess Cash Reserves: Continue to contribute according to your periodic investment plans as investing a portion of your excess cash reserves while markets are trading at more favorable levels.
We continue to be all-hands on deck and focused on making sure we are doing our job as your wealth management, financial advisory, and financial planning team.
Barron’s, Josh Nathan-Kazis, May 17, 2020
MarketWatch, May 19, 2020
MarketWatch, May 20, 2020
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management.