Our everyday lives have changed dramatically over the last few weeks as we work together to minimize the impact of the COVID-19 pandemic. We know these efforts are necessary, but they also have come at a cost.

Global economic growth has been slowing, the US economy likely will contract, and US stocks have entered a bear market. Big stock market moves, both up and down, have become the norm. In short, this has been a challenging period for many long-term investors, and you’re asking what’s next and what to do.

We entered 2020 with portfolios positioned more conservatively as we believed that the odds of a recession were increasing as the economic expansion aged.  Certainly, a global pandemic wasn’t in the outlook at that time.  As the economic situation has changed rapidly our portfolio positioning continues to evolve in seeking to take advantage of an almost 20% rally in stocks (S&P 500) and further reduce risk in some of our strategies. (YCharts)

One of the largest challenges in responding to the current scenario is that the medical response (sheltering at home) is at odds with the solution needed to dampen the economic impact.  In most recessions people are encouraged to get out of the house and spend.  With that context we see a couple potential paths forward each requiring a different approach.

The first would be driven by a medical breakthrough.  This could be anything from a new treatment, promising news on a vaccine, or significant progress on the number of cases and deaths.  We believe that this scenario could be a game changer as it would potentially address the near-term medical risks and give people confidence to venture out and spend.  Amidst the backdrop of significant monetary and fiscal stimulus this scenario could present us with reason to become more optimistic and adjust portfolios accordingly.

The second scenario is one in which there is no immediate medical solution and the current social distancing, shelter at home, and other guidelines continue for an extended period of time.  We believe that this scenario has the potential to prolong the economic downturn.  This doesn’t mean that stocks won’t rally – in fact, during most bear markets stocks will experience days and potentially weeks of stronger performance.  Our game-plan in this scenario is to seek to continue to reduce risk within portfolios as we see these opportunities.

We will continue to monitor closely the ongoing situation, make necessary portfolio changes, and continue to communicate our outlook as market conditions change. 

Please stay healthy and let us know if you have any questions.

Sincerely,

Your Team at TLWM

*Investment advice offered through TLWM, LLC., a registered investment advisor.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Texas Legacy Wealth Management and its representatives are properly licensed or exempt from licensure.

* No strategy ensures a profit or protects against a loss.