Greetings to Clients and Friends of the Firm
In response to recent events, New England Investment & Retirement Group, Inc. would like to give an update on multiple fronts, including how we are working through COVID-19 as a firm, our view about the extreme market volatility, and our strategy to manage our portfolios through this challenging time.
Our COVID-19 Response:
NEIRG places the utmost priority on the safety of our colleagues, clients and business partners. As concerns surrounding COVID-19 have an increased impact on our communities, it is important to provide details on the actions and precautions we are taking.
At NEIRG, the well-being of our staff is our top priority. We are taking steps to minimize risks to our teammates and will follow the guidance of the CDC and local health officials. Due to safety concerns, for the foreseeable future, our staff will conduct investment review meetings with clients via GoToMeeting (video) or conference calls.
Our team of talented and caring professionals will continue to be highly responsive to your needs. Interacting from multiple locations is part of our everyday experience. While unfortunate, the current situation will not hamper our ability to serve clients and there will be no interruption to our Firm’s day to day business activities. Additionally, our investment team is closely monitoring developments in the markets and collaborating about the best course of action.
Our Market Outlook and Management Strategy:
If you are like us, you are experiencing some uneasiness right now. It’s a bit like the feelings during 9/11 and the 2008 financial crisis. Throughout these periods of vast uncertainty, our country has an undeniable history of persevering and ultimately conquering seemingly insurmountable challenges time and time again. The success formula often includes having a plan and working as a team. We feel our country is making the right moves from a medical and health safety standpoint to rapidly slow the expansion of the virus.
As of market close on last Thursday, March 12th, the S&P 500 Index had fallen 26.7% from its February 19th peak and is now down 23.2% since January 1. We’re officially in bear market territory and it happened very quickly. Markets rebounded sharply the following day, Friday the 13th, after President Trump’s late afternoon announcement implementing the Federal State of Emergency Coronavirus Response. The plan is a joint effort between our government and some of the private sectors’ largest corporations such as Walmart, Google, Walgreens and Roche Pharma to name a few.
As the unfolding human and financial damage from COVID-19 hits the population and market participants, memories of the 2008 financial crisis and the immediate aftermath of the 9/11 attacks come to mind. While the 2008 financial crisis is perhaps burned more deeply into our collective brain given its relative recency, it is our view that the immediate aftermath of the 9/11 attacks are a better comparison for the COVID-19 crisis. As you may recall, immediately after 9/11, fear understandably gripped the population and markets, and meaningfully impacted economic activity as travel was shuttered and people were generally fearful about leaving their homes. In the COVID-19 case, while the onset of fears was more subtle and gradual, the economic consequences are likely to be longer-lasting and further-reaching than 9/11.
Since our firm was founded 25 years ago in 1995, we have managed assets and worked with clients through 3 major bear markets and multiple sharp double-digit corrections. Previous experience has taught us that through extremely volatile environments, such as the one we are currently experiencing, keeping a cool posture and not overreacting will prove to be the best course of action. Methodically adjusting portfolio strategies to reduce downside exposure rather than selling into panic will prevail. By handling the markets in this fashion, we will be able to capitalize on the inevitable upside reversal that will eventually follow.
To adjust to this rapidly declining market environment, we have used a three-legged approach as follows:
First, over the past 3 weeks we have raised cash levels in the portfolios. This provides us with available funds to utilize when the opportunity presents itself to buy into favorable sectors of the markets at lower valuations.
Secondly, we have also implemented downside hedging strategies to further reduce the risks of harsh market selloffs in the equity markets.
Thirdly, we have added to fixed income bond allocations to provide stability and additional dividend yield to our portfolios. We are also still maintaining our defensive posture with holdings in gold, utilities, and real estate.
Our belief is that we have not seen the end of the selling in this bear market environment. Bear markets will have sharp upside rallies as we witnessed last Friday that will cause more mental fatigue on investors because of the see-saw action that drives volatility. Depending on how the virus either spreads or subsides and how we handle this as a nation will provide the relief needed to put an end to this crisis.
We will continue to take advantage of the market volatility to make portfolio adjustments and will be here to field any questions or concerns as we navigate through this challenging time. As is best practice for successful organizations, we will adapt as this situation develops. We will post updates as needed on our website and will communicate via email and social media with future announcements.
As a final note, we want to express gratitude for the trust our clients and friends place in us. Please feel free to contact any of our professionals for assistance.
All material and information is intended for New England Investment & Retirement Group, Inc. business only. Any use or public dissemination outside firm business is prohibited. Information is obtained from a variety of sources which are believed, though not guaranteed, to be accurate. This presentation does not represent a specific investment recommendation. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. New England Investment & Retirement Group, Inc. and its employees do not provide legal advice, and do not provide tax advice outside of the advice given in relation to financial planning and asset management services.