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Market Strategy Related to Coronavirus

Wealth Management

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We will not reiterate what you have been hearing on the news about the coronavirus.  All of the possibilities of things that may happen have been well-publicized. 

Our purpose here is to inform you of what HKFS is thinking and how we have positioned portfolios in ways, we believe, make sense for your long-term benefit. First, it is important to understand the markets have reacted to what might happen rather than what has happened. We have had a correction that is roughly 10% on most of the market averages, which is an event that happens at least once almost every year. They usually come out of the blue and happen quickly. From a points-on-the-Dow perspective, with a drop of 3,000 points, it seems like a huge number, especially to those who were around when the index traded below 1,000 (yes, that is ONE thousand!).

As a reminder, over the last several months we made changes to the stock portfolios to weigh more heavily than usual to our U.S. market, and to weigh more heavily than usual to large-cap value and dividend paying companies. As a side note, the funds we primarily utilize for allocation to dividend paying large-cap stocks currently pay dividends equivalent to yields of 3% or more, compared to a safe-haven 10-year Treasury note at approximately 1.25% yield. We believe these were appropriate moves and help in times like these. For portfolios that hold bonds, which is most, prices have actually risen on most bonds over the last few weeks, so stock price declines have been partially offset by gains in bond investments. 

While the probabilities of a recession, according to some economists, have risen, most believe recession is not the most likely outcome. Basic fundamental economic numbers remain positive. This sudden stock market correction has priced assets to more closely reflect the higher perceived possibility of a slow-down. We had a very strong rally in stock prices over the last year and into the early part of this year. It was only a matter of time before some catalyst caused a disruption to that rally, and at the risk of sounding trite, nothing goes up forever. 

While we always encourage you to speak to your HKFS financial planning consultant about any questions or concerns you have, we don’t believe this is a time to deviate from a long-term investment allocation that has been designed to make sense for you. It is always important to let us know of any circumstances that may have changed so we can help you decide if there are reasons to make adjustments.

This communication is for informational purposes only. It is not intended as investment advice or an offer or solicitation for the purchase or sale of any financial instrument. Indices are unmanaged, represent past performance, do not incur fees or expenses, and cannot be invested into directly. Past performance is no guarantee of future results.

Advisory accounts and services are offered through HK Financial Services (HKFS), a SEC-Registered Investment Adviser. Brokerage accounts and services for transaction-based fees are offered through Registered Representatives of ProEquities, Inc., a Registered Broker-Dealer, Member FINRA and SIPC. HKFS and ProEquities are independent unaffiliated entities. 1582835103149

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