Broker Check

Update 3/23/2020

March 23, 2020

We hope first and foremost that you and your loved ones continue to be safe and healthy. That is our number one concern! At this point, we are continuing to work and serve. We are set up to run virtually if we need to do so. Helping you is our mission and it is crucial we continue to provide value during this extreme time. We are practicing social distancing and at this point trying to minimize in-face physical meetings with clients and trying to conduct business through phone calls and virtual/computer meetings.  Today, Larry Hogan mentioned that all non essential businesses will be closed.  We are considered an essential business and are available to help all of our clients!


Last week was one of the most volatile weeks in the history of the markets, as governments and businesses grapple not only with the pandemic aspect of Covid-19 but both the short-term and long-term impact on businesses and the financial markets. We continue to simultaneously talk to clients and follow the markets, do research, read voraciously, and stay on top what is happening financially. The link below is one from Capital Group, the parent company to American Funds on dealing with volatility.


We follow a wide variety of investment disciplines. We feel it is crucial to look at everything and not discount any philosophy. In our opinion, no philosophy is 100% fool proof and is the end all be all. We try to synthesize the truth in a variety of disciplines. An analogy that I can think of is a doctor who may combine traditional medicine mixed with alternative medicines and study of diet and other points of view. One investment discipline is called technical analysis, trend following, momentum investing or charting. In this approach, technical analysts look at the markets and look at something like the S&P 500 and try to determine where the market is heading by the charts and the momentum. Some people argue adamantly against it and some totally embrace it. We look at it as data points to shape our opinion. One of the things that they talk about in technical analysis is what is called support. In bull markets what is the upper end of a ceiling. In bear markets like we are going through, they look at the floor or what is lower end of the threshold.


The S&P 500 this year peaked around 3300 and since then it has gone down to 2300. The question is have we hit a support level or will market continue to go down. In a lot of our research, the challenge is there is currently a lot of uncertainty and no one truly knows. We are mentally prepared that it could continue to go lower to lower levels of support. As a result, this weekend, I was thinking of what to communicate to you. When should you sell stock during extreme market volatility and bear market? By and large, we have communicated that we tried to work ahead of time with you to create your long-term plan that accounts for situations like this. It is sort of like someone living in Florida. They don’t build houses knowing exactly when hurricanes may hit but they build them knowing they could hit. For the vast majority of our clients, we believe that your plan is stress tested to absorb situations like this.


However, when should you sell stock during a bear market when your account has already been affected. As we have talked about before, we understand that people are in different situations and to say blindly follow it out may not make sense emotionally. Here are reasons why one would sell during a bear market:


  1. If your cash flow is or going to be adversely affected whether through job loss or some other factor and you know for certain that you will have to draw substantial amounts out of the part of the portfolio particularly the part in stock. This is why we are believers in having rainy day funds with cash. However, we understand that folks may have to draw significantly from their portfolio to meet living expenses. Do not mistake this for taking regular planned distributions over the long-term for retirement income planning. Most retirement income planning builds withdrawals based on knowing stock market can go down and usually draws on the more conservative part of the portfolio to allow for the gyration.
  2. Emotionally, you cannot deal with the volatility. This is a tough one. As much as we encourage folks to think long-term and think this too shall pass, we understand we are all different and some folks this is just too much. Something that always resonated with me was something the real-life J.P. Morgan said at the beginning of last century when someone asked his advice during a bear market, “Sell to the sleeping point.” His view, sell to the point where you can sleep at night.
  3. To go along with number 2, if your world view is shaped that this time it truly is different, that the system is irreparably broken, and things will never recover and one needs to totally protect. History suggests that things come back over time whether quickly or over time. However, we do understand that folks might feel otherwise.
  4. If you have a disciplined and proven approach. We have worked with some investment managers who are called tactical managers who use hedging mechanisms. There approach is based on research and analysis and not just purely emotion and gut level responses.


By and large, for the majority of people, they should stick with their long-term plan. However, if you feel that alterations need to be made to your plan, please contact us. Also, if you have friends or family who do not have any guidance and need perspective, we are here to serve. Be safe and stay healthy.


How to Handle Market Declines -


Coronavirus: A Perspective for Long-Term -