February 2020 Update
A client called today to share a message she saw that summed up how she felt: “Keep Calm and Wash Your Hands”.
This is the perfect slogan for me to express how we at DTIM are reacting to the current equity market declines. Although we have been prepared for a pullback since October of 2018, -12% declines on the indexes and the arrival of the coronavirus in the US are still not fun.
However, we do believe that we are now in a fear based period of market anxiety as we have yet to have a real economic impact on earnings due to the virus, but rather the anticipated response to this outbreak (production freezes, quarantines, kids staying at home, postponements of events, etc.). Once the fear passes and these anticipated mitigation efforts subside, things will return to normal.
Below we have listed a table that breaks the S&P 500 industries into 3 segments along with their performance over the past week. The areas of the equity market that have been hardest hit include airlines, hotels, and energy and we expect these to bounce back the most when the coronavirus subsides. The middle column shows the areas of the market that have hung in very well, including REITs and utilities. Finally, there is the group that has been slammed and yet has nothing to do with the virus -a group we will call “Throwing the Baby Out with the Bath Water” as they hold high quality companies.
Our equity portfolios are performing relatively well since we are mostly exposed to the middle category. We are busy evaluating each investment looking for opportunities to adjust and perhaps buy some great companies that are deeply on sale.
Our fixed income portfolios have done extremely well this week as interest rates continue to decline. As I write this, the 10-year treasury is at 1.2%. Lastly, our gold positions are up +7.5%.
As always, diversified portfolios and commitments to long-term strategic allocations are the best course of action during turbulent times. We plan to “Keep Calm, Wash our Hands, and Remain Disciplined in our long-term investment strategies”.
Please feel free to call or write with any questions or concerns you may have. We are grateful for your trust in us and remain dedicated to you and your investments.