At Advance Capital, the well-being of you and your family is our top priority. We understand the concern and uncertainty you may be experiencing surrounding the coronavirus outbreak, as well as its impact on the capital markets and economy. We wanted to take the moment to reassure you that we are committed to being responsive to your needs as the situation evolves. We are working diligently to navigate the plethora of information to make informed investment decisions on your behalf. An emotional or impulsive decision often ends up being the wrong one. We prefer making changes to your account that are based on solid economic data and concrete facts.
Right now, our domestic economy still seems relatively healthy with very low unemployment, a robust jobs picture and a housing rebound. Economic activity has been only minimally negatively impacted from the virus and supply chain disruption. The federal government is preparing to respond. Already, the Federal Reserve made an emergency cut to short-term interest rates as an insurance policy, and more might be on the way. Also, policymakers are discussing various fiscal measures to help ease the financial burden on workers and companies should the situation worsen.
In this environment, investors have shunned risk assets in favor of U.S. Treasury bonds. Stocks are down about 20 percent from their recent all-time highs. But bond yields have fallen, which increases bond values. Further, there are positive aspects of the market selloff that should help the economy recover faster. Lower oil prices mean drivers will save at the gas pump, and lower natural gas prices mean lower heating bills. The collapse in interest rates has led to record low mortgage rates.
This type of environment is precisely the reason we utilize proven investment managers with a track record of holding up well in volatile markets. It is also why Advance Capital believes in diversification and long-term investing with a keen eye on the opportunities and challenges that lie ahead. No investment is infallible and sometimes markets go down. Collectively, we have managed through similar crisis periods, and will do it again.
We currently believe there is rising risk of an economic slowdown over the next three to six months. This could be caused by individuals choosing to stay home and cutting back on restaurant, travel and entertainment spending. We have already seen many colleges close their campuses and send students home, with primary and secondary schools preparing to follow suit. This will likely impact many small businesses and hourly workers around the country.
To insulate our portfolios somewhat from this risk while still staying open to the possibility of a rebound in the economy and markets, we are reducing U.S. large-cap equities in models. This reduction will allow us to preserve capital in case of a further downturn and position us to be able to buy back into the markets at more attractive levels. This change stays true to our philosophy of staying invested for the long term but reduces our risk over the short term. We still believe in the growth potential of U.S. companies, but think it is prudent to reduce risk over the short term.
For more information on how markets behave and why sticking with your investment strategy is the right move, I encourage you to read our whitepaper: How to Survive a Market Downturn.
As always, the health, safety and well-being of our clients is of paramount concern. Therefore, we have made the decision to postpone all spring client meetings. An online webinar will be made available in place of in-person gatherings. We will update you once a plan is finalized, and we apologize for any inconvenience.
We continue to monitor this quickly evolving situation and will keep you informed on our thoughts and investment strategy. In the meantime, if your risk tolerance has changed, we can work with you to determine whether changes to your account are appropriate. The team at Advance Capital is here for you — don’t hesitate to reach out with any concerns or questions you might have.
We are also committed to providing our employees and clients a safe and healthy environment. Therefore, we want to let you know the steps we’ve taken to protect our employees while ensuring that our services are uninterrupted.
The following adjustments are now in effect:
- For the safety of everyone, in-person meetings are postponed until further notice. Additionally, all Spring Client Meetings have been cancelled. We encourage individuals to contact their adviser directly to discuss whether a phone call or video conference would be a suitable alternative.
- We have suspended all business travel for our employees until further notice.
- We are transitioning all of our employees to work remotely for the next several weeks. Again, we are making sure everyone has the tools necessary to provide our clients the level of commitment and service you expect from us. You can still reach us by using the same phone numbers and email addresses.
- Our investment team will continue to work diligently with our advisers to evaluate and adjust all client accounts as needed.
We continue to monitor this quickly evolving situation and will act accordingly to ensure the safety of our employees while continuing to support our customers. You can expect regular communication from us to keep you informed of the situation and our recommendations.
Would you like to hear from us more frequently?
Each day there are new developments regarding the coronavirus and the financial markets. We know that during this quickly evolving situation it can be challenging to process all this information and to separate fact from fiction.
Therefore, we would like to provide some additional insights electronically that may be helpful to you. If you like to receive more frequent updates from us at this time, including blogs, videos, and select trustworthy articles we find online, please sign up here:
Once you sign up, you can expect to receive an additional 1-2 emails per week from us to help you navigate the rapidly changing news cycles, especially regarding financial issues and the markets. We will also shine light on the positive developments happening around us, which can easily be overshadowed right now.
Please note that these additional communications will not contain information on your accounts or other critical information. We will continue to send that information to all clients when necessary.
As always, thank you for your support.