As a general rule, we are very cautious in commenting on the normal ebbs and flows of the stock market, as headlines have to be written daily but in our view, many times just add up to collective whims of investors. This, unfortunately, may not be the case before us at this moment.

There was a time in my career when I confidently referred to concerns about subprime mortgages as “much ado about nothing.” But as we all know,  seemingly innocuous items can add up to large ramifications for our economy, and, as a result, the stock market. As we have entered correction territory, defined as a pullback of 10%, it is not unfeasible that we could approach a bear market (losses of 20% or more). We have said in the past that the current bull market is unlikely to end just due to old age, but rather due to something unforeseen happening. A coronavirus pandemic could be “the” unlikely event.  

The measures intended to quarantine off the virus have, and will, cause disruption to the global economy and it could get worse before it gets better. Fortunately, both in the U.S. and globally, we have a good record of containment when prior communicable diseases have been found. Additionally, there are some concerns about the prospects of a less business-friendly political environment as the Democratic nomination process unfolds (which we will discuss at a later date in a podcast and/or blog post).

As the vast majority of our clients are long-term investors, we encourage you to exercise caution in trying to market time out of this. As the quarantine efforts and treatment plans unfold, we will see a leveling out and an eventual decline of the infection rate. Once this happens, the market is highly likely to react positively and the demand for products, services, and trade will rebound. The markets are not experts on pandemics and don’t know how big these disruptions will be, but the old saw “the market hates uncertainty” means that traders and analysts will often try to price the worst case scenario in order to protect themselves. As we simply don’t have enough data to accurately predict what will happen or the duration of this disruption, we encourage patience and perseverance. 

We knew that a correction (and potentially a bear market) was inevitable at some point and for the vast majority of our clients, we have consistently rebalanced toward assets in their portfolios such as bonds that do not follow the stock market and will help in times of decline. We believe strongly in diversification, and these are the times where it can help cushion the blow. However, should you need money in the short term, you should discuss that with us.

Our team at Walkner Condon follows a disciplined investment process, and we intend on rebalancing our portfolios into down markets to position ourselves opportunistically. Our core values dictate that we do what is in your best interest, and we will continue to try and fulfill that for each and every one of you, regardless of market conditions. 

Clint Walkner and the Walkner Condon Team