During this volatile economic time and beyond, two financial advisors offer some ideas on how to care for your money
By: Chuck Gibson
LOVELAND, OH (April 26, 2020) – The focus is on physical health during this coronavirus (COVID-19) pandemic – as it should be – yet the economic impact is already being felt nationally, locally, and personally for all of us.
Jarvis Global Investments, LLC is based right in Loveland, OH (Provided)
Just as many unknowns remain regarding the pandemic coronavirus disease COVID-19, there are many unknowns regarding the economic impact resulting from the crisis. Too many for financial advisors like Ron Doyle, co-managing member of Meadowbrook Investment Advisors based in Michigan, to be able to analyze at this time. Likewise, Art Jarvis, President, Chief Investment Officer, Jarvis Global Investments, LLC based right here in Loveland, Ohio warns of the uncertainty and volatility of the current financial market. Both offer some tips to help keep your financial future healthy during this time of uncertainty.
Quick Tip Asset Protection Preview:
- Have liquidity/Cash – accessible funds
- Opportunities – Seek quality companies that will prosper after
- Actively manage funds/portfolio – Rebalance/continue toward target
- Stick to your plan – Don’t panic
- Ask your financial advisor – What is their strategy? Strategy for your money?
“Let me start with anything I say should be consulted with a financial advisor, implemented, or considered depending on your personal financial situation,” said Jarvis. “We just ran into a brick wall. We have been enjoying, since March or April of 2009, a bull market.”
For some background, Jarvis says the last 10-11 years, we’ve experienced a U.S. equity driven market; meaning people who were invested in U.S. stocks fared exceptionally well. He cited as an example the Dow Jones rallying from about 6,000 in 2009 to 29,000 during the past 11 years. The U.S. also experienced record employment and unemployment lows of 3.5-percent. It was a decade of holding steady with stable financial portfolios for investors. While some began to say a correction was due, Jarvis doesn’t believe a bull market should come to an end while experiencing great economic numbers.
“It’s interesting to me that we ran smack dab into this pandemic,” Jarvis said, “and basically we turned the spigot off. We didn’t slowly turn the spigot off, we turned the spigot off! It’s just interesting how fast things have changed.”
Ron Doyle is co-managing member of Meadwobrook Investment Advisors, LLC based in Livonia, MI (Suburb of Detroit) (Provided)
That sudden change took place the first week businesses were being ordered to close and people were being ordered to stay at home in mid-March. Ten plus years of stable portfolios and minimal movement suddenly became substantial activity with decisions on where the market may go and how long a downturn might last.
Jarvis Global was already making some adjustments in the portfolio in anticipation of volatility due to the election year. Doyle says Meadowbrook Investment Advisors, LLC advised clients to find a comfortable level of liquidity to carry them through.
“You need liquidity, available cash. We’re looking at a big valley,” said Doyle. “Hopefully, you look out far enough; you can see clear sailing at some point.”
Nobody can say for sure how long it will be until we get there. Doyle says once you’re comfortable with the liquidity to see through the tough time, then look for opportunities
“Our clients have been remarkably calm,” Doyle said. “They were much more panicked during the 08 financial collapse. We look for opportunities to invest in companies that are going to prosper once things get back to some semblance of normal.”
Doyle warns a lot of things are going to happen we just can’t imagine right now. He and Jarvis both agree that translates to more activity within your investment portfolio – not making knee-jerk, panic reaction moves, but having your financial advisor actively “tweaking” your accounts to protect and grow your assets. Jarvis says the pandemic shutting things down accelerated the process of investors adjusting the balance of their investments.
“We have to go into protection mode,” said Jarvis. “We don’t want to give up what we’ve been able to achieve over the last few years.”
Jarvis defined the first step of protection mode for their clients as taking funds out of the equity (stocks) market and
moving them into money market funds (liquid/accessible cash). Another step toward protection for your investment funds would be “sector allocation” – changing the balance of the allocation of your funds. He cited the options of stocks, bonds, or cash.
“You have to start moving from higher up the risk curve –usually meaning stocks – to things a little lower on the risk curve, whether it is bonds, cash, or commodities,” Jarvis explained. “You start making those decisions.”
Money jar at home would be drastic and is probably not a reasonable option (Stock photos)
If the economic indicators continue to worsen, then Jarvis would advise more drastic changes. Those might mean moving from 60-percent financial (stocks) sector, to potentially zero percent and moving to a more defensive position with bonds, or commodities. Doyle says Meadowbrook does not use mutual funds, options, hedge funds, or private equity. He describes a “try to make it simple” very conservative approach which is not too high risk.
“We’re pretty meat-and-potatoes investors; don’t stick our neck out too far,” said Doyle. “We try to take advantage of opportunity when we see it. We want to make sure everyone is safe and comfortable with our investment approach.”
Again, he emphasizes liquidity: cash, not hard cash hidden under your mattress or in a jar, but money market, bonds, short-term and short-term treasury. While Doyle recognizes the yield is virtually zero, not making money, he points out the access (liquidity), and no drop in value like a stock would. The trouble with bonds is the interest rates are so low the risk is in the duration of the bond with too low of return.
Jarvis cited Dow Jones as just one of many indicators of economic conditions (Stock photos)
“From an investment standpoint, this is about balance sheet, not income statement,” Doyle explained. “We look at individual companies doing decent business that will withstand the downturn. Let’s go with companies we know will make it through.”
Doyle is confident the big picture reveals a strong U.S. economy which will respond positively at some point. Yes, there will be casualties and, in his own words, “unintended consequences” from government action taking on debt to get people through this. His question is will bailouts save businesses, but cost banks and shareholders potentially making some stocks worthless.
“It is going to happen in phases. It’s a very unusual time,” he said. “I’m surprised the market has come up as fast as it has. It cascades: dropped fast, bounced back, steady, then possibly we’ll see another drop.”
Art Jarvis, President, Chief Investment Officer, Jarvis Global Investments, LLC (Provided)
Jarvis was equally surprised, even concerned at how fast the market came back up following the initial downturn that first week of this roller coaster ride. His time is consumed now talking with clients, listening to their questions, reviewing their plan, and then strategizing the plan for the next 6-12 month period. No one knows if there will be another severe downturn, or when the economy will steady. He thinks it will not be immediate, but rather longer and slower creating a need to plan for the next 12-18 months. Jarvis and Doyle agree protecting your financial health is dependent on your risk tolerance; your own individual needs.
“There have been more than a few occasions where people have been hurt by the market short-term,” Jarvis said.
“You go into protection mode to protect what you have. There are a couple theories out there. One is you buy and hold; you don’t panic, you don’t get out. I believe, in times like this, there are opportunities. The point is take good care of your clients at the front end, then figure out when to get back in.”
They have said it differently, but both experts agree, taking care of your current assets and looking for opportunities is the best way to protect your current and future financial health in an uncertain economy.
“Stick with your investment plan,” Doyle said. “We have a plan for every client for asset allocation. You need to rebalance, start to rebalance, take it slow, work toward your target, emphasize quality companies that will make it through and have a good outlook on the other side.”
Stick to your plan, look for opportunities, and enjoy the next Bull Market Run (Stock photos)
Because the response and recovery to COVID-19 is not like flipping a light switch, but more long-term, it is expected to come in phases. The financial advisors see it as a much longer time of uncertainty requiring greater attention to your financial planning for protection of your financial health.
“We’re going to have to be much more active in our portfolio management over the next 12-18 months to take advantages of those peaks and valleys in the market,” said Jarvis. “There’s going to be a whole lot more of those peaks and valleys than there have been in the last 10 years.”
In final analysis of the uncertainty of the economic impact of the COVID-19 crisis, every individual has a different set of circumstances to protecting their health, both physical and financial. The recommendation is clear: Go to the experts. If you are feeling symptoms of the virus, you go to the medical professionals for proper care. If you are concerned about your money, go to your trusted financial advisor. Here are two simple questions to ask your financial advisor:
- What is your game plan/financial strategy overall?
- What is your game plan for me individually?
Remember: every client is different, there is no one-size-fits all plan. Your financial advisor should be in touch with you. If you have not heard from your advisor, you should contact them now.
Click here for more on Meadowbrook Investment Advisors, LLC and Ron Doyle
Click here for more on Jarvis Global Investments, LLC and Art Jarvis