I hope you and your families are safe and healthy. Money is the last thing that everyone needs to be worrying about while everything is going on, so I want to pass along some good news in that regard. To begin with, everyone’s accounts are down for the year. What’s good about this is that we were positioned defensively ahead of time.
Longer term accounts are down further than the accounts designated for short term savings, but they will recover. Overall, all of the managed assets in my portfolio are down about 10% from the peak in February (as of the last market close). A big reason for this was my decision to stay overweight in reserves of cash as well as ultra-short and short term bonds. Over 22% of all managed portfolios are currently in cash at this point. Short term (near cash) bonds are currently 24% of the entire portfolio with another 16% in intermediate bonds.
The stock investment results are not great… but they could have been a lot worse if we had stuck with traditional investments. For example, the equal weight S&P 500 index funds fell by 31%, yet the actively managed fund (PRBLX) I introduced recently only was down 18%. The most recently added fund (CDC) tracked the S&P 500 index but it was built with internal stop losses. This fund has only fallen 15% for the year. By diversifying out of the standard indexes, we’ve avoided some of the worst declines.
I’m in a holding pattern right now when it comes to rotating back into the market. The value sector will see a surge in demand as consumer staples pick up. This area will most likely lead the market rebound going forward. When that rebound will come is anyone’s guess… but I assume it will take some time.
The technical analysis below shows that we’ve entered what is known as a ‘megaphone’ trend line. This is usually bearish, which matches my market expectations. The blue line that angles downwards is the support line that I have mentioned in recent communications. A support line is the bottom of the market. Once I feel comfortable that there isn’t too much further the market can fall, I’ll begin to pick up assets with our cash reserves. Between limiting losses and buying securities at a discount, we’ll be ahead of most investors.
My advice to everyone is that we remain patient until then.