To say this has been a difficult week for the financial markets is an understatement. I thought it would be helpful to provide a quick update heading into the weekend. We are always available to answer any questions or concerns!
- Why are the financial markets experiencing extreme selling? The spread of coronavirus outbreaks beyond China has opened up a new global dynamic to the epidemic. The spread of this disease to other parts of the developed world has caused concern about the slowing of global economic activity around the world, thus ending the global economic expansion. The slowdown may push some developed economies that were not as strong as others toward the brink of a technical recession.
- What are experts saying? The situation is extremely fluid making it difficult to accurately predict any outcome. Most experts will site past historical events similar to this as reasons why this will be a short term market event. The majority of the economists on TV or who we have spoken too all seem to agree that this will not derail the economic expansion. In reality no one really knows the answers to these questions, all we can do is analyze the data being given, don’t panic and WASH OUR HANDS!!!!
- What has been our response to the selloff: We have taken this opportunity to stress test portfolios. We measure the downside performance vs corresponding benchmarks to make sure we are performing in line with our risk tolerances. We also review non equity correlated assets such as our bond positions to ensure that they are not declining along with equities. We still don’t recommend selling assets during a time period like this instead we will continue to monitor your risk and ensure that portfolios are positioned as best they can to navigate through this volatility.