March 2020 Portfolio Management Team Update

Elvis Picardo

March 5, 2020

Market & Economic Environment: After weeks of ignoring the steady drumbeat of negative news emanating from China and other places suggesting that the novel coronavirus was spreading globally, investors’ complacency turned to outright panic in the last week of February, triggering the fastest-ever correction (decline of over 10%) in the S&P 500. Just days after reaching new all-time highs, major US indices endured their worst weekly performance since the 2008 financial crisis in the week ended February 28, as news of significant clusters of coronavirus cases in Iran, Italy and South Korea led to escalating concerns about the potential spread of the virus to North America and the havoc it is wreaking on the global economy. The S&P 500 finished the month down 8.4%, while the Dow Jones Industrial Average (DJIA) plunged 10.1% and the Nasdaq Composite retreated 6.4%. The TSX Composite fell 6.1% in February, as all 11 sectors finished in the red, led by the Health Care, Materials and Energy groups. (Data Source: FactSet)

Our Strategy: Market volatility has continued unabated in the first two trading days in March. US equity indices surged 5% on March 2, with the DJIA recording its biggest point gain in history, on optimism that major central banks would take concerted action to support economic growth. On March 3, however, even as the Federal Reserve slashed its benchmark interest rate by half a percentage point in the first such emergency move since the 2008 financial crisis, US indices fell 3% on mounting fears that the coronavirus outbreak could stall the record US economic expansion. As noted in last month’s Newsletter, the Portfolio Management Team (PMT) had expected volatility to be elevated in the near term. Based on this view, the PMT trimmed profitable positions around mid-February and allocated the proceeds to fixed income and other less-volatile securities. The PMT also took advantage of the market pullback to add to existing positions in the first two trading days of March. The PMT expects to make ongoing adjustments to client portfolios to ensure that they are adequately positioned in the current fast-changing market environment.

Please contact any member of the PMT if you have any questions or concerns regarding your accounts.