What began as a news item in a Chinese city about the size of the ‘Chicago Tri-State’ metro area is now wreaking havoc on global health, our lives and financial well-being.  For financial markets, it brought the biggest quarterly declines since the financial crisis onset in the last three months of 2008.  The grim news is that in the U.S., large stocks declined ~20% and small stocks fell ~30%, while foreign stocks lost ~25%.

In spite of this, as over half our clients heard last week at one of our webinars, we firmly believe that – financially speaking – you are going to be OK, based on the following steps taken:

• Going into 2020, your portfolio was already positioned with about 1/10 less in equities (stocks) than before they became so highly valued (priced).  In other words, your portfolio began the year at the conservative end of its equity allocation range in your specific investment policy.
• Several weeks ago, we decided to move all the bonds (fixed income) in your portfolio to holdings which are direct U.S. Government obligations (SCHR and VGSH).  Previously, 50% were here.  For retirees, this placed 7+ years of withdrawals in the planet’s most secure and liquid assets.
• Global economic responses (from the Federal Reserve and other central banks to fiscal policy, like the CARES Act) exhibited a whatever-it-takes approach – just what the financial doctor ordered.  In the U.S., the $2.2 trillion package will cover 20% of our ‘normal’ GDP over the next six months.
• All this supported our convictions that global stocks markets will (eventually) recover (again) and that U.S. Government bonds will remain unaffected by equity declines, thus providing the time and ‘cushion’ to fund your lifestyle needs, letting us be patient and avoid having to ‘sell low’.
• Two weeks ago, just before the CARES Act passed, we took advantage of the equity declines to re-balance your portfolio and ‘buy low’, adding to your U.S. equity holdings at stocks prices 36-43% below the February highs.  To illustrate, portfolios with 60% stocks had declined to ~52% stocks; these purchases took them back to ~60%.  The plan is for this level to ‘ride up’ as markets recover.
• For retirees using our Dynamic Withdrawal Policies for portfolio income, the ‘guardrails’ to signal a ‘cut’ still have a ways to go before they are triggered, as we told the Wall Street Journal (article attached) in March.

Finally, though it’s not something we or anyone else ‘did’, we are reminded that individuals, communities, nations and institutions have a resiliency which isn’t often visible.  Yet it’s been there time-and-time-again in our history, and we see the strength of its presence today as well.  This gives us hope and confidence.

For ALL these reasons, we believe both your financial plan and portfolio are very well-positioned and look forward to taking or advising further beneficial steps (e.g., swapping assets to generate deductible tax losses, mortgage refinancing, accelerated purchases/charitable contributions and possible Roth IRA conversions) on your behalf in the coming days and weeks.  And, of course, watching events very closely.

With best wishes for health and perseverance, thank you for the continuing opportunity to work with you.