A frequent question I would like to attempt to address is the notion that “this time is different” from previous bear markets. Although clearly differences in the causation, I would argue this time is not so different from how markets and investors have reacted in the past:

1) We have gone through the same set of emotions that always occur on the way down – denial, fear, desperation, panic, and capitulation;

2) The markets quickly priced in worst case scenarios and likely have bottomed 3-6 months ahead of the economic data;

3) Earnings projections have been slashed, companies have raised massive amounts of cash and dramatically cut expenses;

4) Credit spreads widened and then retreated as liquidity was added back into the system.

While often difficult to look through a crisis when it’s cresting, the market similarities borne out so far give me some comfort there is light at the end of this tunnel as well.

Positively, for those comparing notes from the GFC (Great Financial Crisis) in 08/09, the main differences appear to be a banking system that is far better capitalized, a Federal Reserve and Congress reacting far more quickly, and a consumer that seems to be less leveraged in housing. From a portfolio standpoint, as difficult as it was at the time, we added to risk assets in March and April through rebalancing. Then in late May, after a historic rally, we trimmed back the gains as the markets appeared to be getting ahead of the fundamentals.

We will continue to be disciplined in the management of our clients’ portfolios, recogniz- ing there are heightened potential risks with second wave virus threats, trade tensions with China and the upcoming elections. With these concerns top of mind and valuations extended, we do not anticipate adding to equities in the near term unless we experience additional pullbacks.

Our investment process continues to lead us towards higher quality names with solid balance sheets, reasonable valuations and sustainable cash flows. Despite deceptively attractive valuations, we persist in avoiding areas of the markets where we have funda- mental concerns, like airlines, tourism-focused companies, the energy complex, and traditional retail. Given our concerns longer term around retail and office real estate we recently shifted our focus in real estate investment trusts (REITs) towards data center and storage-related companies, where we see better opportunities for growth.

Although we have not seen the end to the virus, it does appear that the markets and earnings have priced in lows. If history is predictive, the worst for the broad markets is likely behind us and economic comparisons month-over-month should begin to improve from here.

While we certainly prefer the face-to-face meetings, we enjoy meeting with many of you via video conferencing and telephone calls. We are leaning heavily on technology and I may have even mastered how to position my camera in relation to my desk! Through the crisis we have put together a financial resource page that addresses major concerns and questions coming from our clients. Please visit our website, wealthsouth.com, for additional presentations, material, and webcasts.

James Fereday,

Chief Investment Officer