Initial Coronavirus Update
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Initial Coronavirus Update

Coronavirus fears created uncertainty around future growth, supply chains and future earnings.

We went from hitting all-time highs the week before last to having a correction of more than 10% in five days. Yields dropped in tandem, with the 30-year Treasury bond pushing below 2%, settling at 1.60%.

At WealthSouth our core investment philosophy of high quality, value, dividend growth, profitability and balanced portfolios has served us well so far through the volatility. Further, we are not making any major shifts to our strategic or tactical positioning in this market, rather staying true to our discipline and taking advantage of the pull backs for those clients with excess cash. We have consistently reduced risk on the back of higher valuations over the last two years, ensuring we were positioned appropriately before the Coronavirus impact. Our strategic overweight to core bonds and large cap domestic equity have also proven helpful.

There is likely to be more volatility in the months ahead as additional information around the Coronavirus comes to light and a Presidential Election takes center stage this fall. Though we are certainly not looking to minimize the potential impact of the virus, there are some bright spots we would like to highlight:

1) Central Banks around the globe are poised to act if needed. Since drafting this letter,  the Fed unexpectedly cut 0.50% before their scheduled mid-March meeting.
2) Sharp market recoveries often follow global health crises like this one.
3) Continuing jobless claims remain on a downtrend and overall economic fundamentals  remain positive.
4) S&P 500 relative value to bonds is trading at multi-year lows.

I hope this is helpful as you navigate the deluge of Coronavirus news. We will continue to prudently manage your portfolios with the strictest discipline through this challenging market environment. Please reach out to our Investment Advisors at WealthSouth with additional questions.

James Fereday,

Chief Investment Officer

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