The weekend brought on additional fears of the negative economic impacts from the Coronavirus spread. Crude oil is down 20% plus this morning, US Equity futures are approximately -5%, International Equities are currently trading 5-7% lower.
YTD US Equities are -15% as opening this Monday morning.
Bonds, especially US Treasuries (some consider as the ultimate safety asset) are trading at interest rates unprecedented with the US one Yr. T-Bill at 0.20%, 10 Yr. T-Bond at 0.42% AND a 30 Yr. US T-Bond at 0.85%. 30 YEARS and you get 0.85% interest each year!!!!!!!!
>>>>> That friends is FEAR! The VIX index (a fear representative gauge) is trading at 130%, 2nd highest on record, dating to November of 2008 when it reached 203!1
Reminds me of 1987 – SP 500 in 4 days went down by 32% (see chart). Now that was unnerving! I remember where I was and what I told my wife about spending – and as always, she didn’t change too much 😊.
Of course, we have NO idea how today or the near future will shake out for any daily trading index or security. However, our forecast of future returns of the US Equity market (SP 500) is now at 7 % per annum return verses 5% previous. A few more points lower and we are talking good value.
If you are an MCF Client, you know we have moved you out to having anywhere from 7 to 10 years of needed withdrawals from your investment portfolio.2 Not because we predicted a virus, but because we felt the asset prices were getting a little ahead of themselves (they are always ahead or behind).
At this point forward, the volatility we are seeing in all asset classes provides opportunities.
Please reach out to us if need be, otherwise, we will continue doing our job in managing your portfolio in line with your overall Plan.
2Some clients may not hold 7 to 10 years of cash or short-term bonds due to their specific financial circumstances. Please contact us to review your portfolio composition if you have questions regarding your asset allocation. Asset allocation does not ensure a profit or guarantee against loss, it is a method to help manage investment risk. Investing in securities involves risk of loss that clients should be prepared to bear. This writing should not be considered to serve as the receipt of, or as a substitute for, personalized investment advice from MCF. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to contact us.