The last few weeks have been marked by news and developments on COVID-19 that change and evolve daily, and in response we are all focusing on key elements of needed adaptation to protect ourselves and our communities. Economic activity and group interactions are slowing down, and at North Berkeley, we are paying close attention to the reality of this disruption, and how it informs the ways we steward our clients’ portfolios and related financial decisions.
Circumstances are Changing Fast
- Virus transmission is accelerating, with Europe now the epicenter of the pandemic, and cases in the US rapidly rising. We expect the human cost and the stress on our healthcare system is still likely to worsen in weeks to come, and that the situation will continue to look worse even as isolation is helping slow transmission.
- Market volatility has increased, with the S&P 500 declining by 27% in the past three weeks. The pace of the decline mirrors the rapid pace of the global contagion, and has reflected the unlinking of securities prices from fundamental value – because fundamental value is not entirely known in this moment. Geopolitics in Saudi Arabia and Russia have exacerbated pricing chaos, and the economic impact of fighting the virus is very uneven. We do expect the volatility to continue while the public health uncertainty continues.
- Stimulus efforts have increased as well, with the Fed and other central banks lowering interest rates to near zero, the IRS extending the tax deadline to July 15th to provide filing and payment relief, and congress working on a large stimulus package to support small and large businesses, families, and the economy broadly. We are monitoring closely the details of these plans and developing realistic expectations for the impact they hope to have.
Building Calm Through Deliberate Action
- Sheltering in place is slowing down daily interactions, and local economies. People are facing the challenges of self-isolation in the tech age, and many businesses that aren’t able to work remotely have been forced to close temporarily.
- Bonds in our client portfolios are serving as a ballast for liquidity and value, even as changing interest rates are creating limited price fluctuations. This is the role bonds are designed to serve in our diversified portfolios, and these moments remind us of their value relative to stocks.
- Our work in portfolio management and financial decision making is becoming more deliberate, to avoid being swept up in the rapid short-term swings of the market. We are creating the space to act quickly when desirable, and to do nothing when appropriate. Our experiences with other dramatic downturns, most recently in 2000-2002 and 2008-2009, have shown us that remaining invested is the surest path for financial success and flexibility. That said, we are able to make changes that incrementally position our clients more effectively for the eventual recovery, and improve tax outcomes.
What are We Doing as We Look Ahead?
- Increasing communication because we understand that this pandemic impacts families in different ways. We are available to talk about your needs and how the situation is affecting you.
- Rebalancing portfolios, in conversation with clients, as we begin to nibble at stocks at these lower prices. While we work on a discretionary basis in portfolio management, during this time we aim to check in with clients before making changes if possible.
- Tax loss harvesting carefully in order to lower future taxes, while maintaining a balanced portfolio for each of our clients.
- Assessing financial planning opportunities, including refinancing mortgages at current low rates that may provide lower payments now and material savings long-term. We are also reassessing estate plans that may be in the process of change, guiding clients on use of donor advised funds for charitable giving, and more.
We will continue to post updates on Friday afternoons and Mondays, and we welcome more personalized conversations via email, phone, or video call throughout the week.
This commentary on this website reflects the personal opinions, viewpoints, and analyses of the North Berkeley Wealth Management (“North Berkeley”) employees providing such comments, and should not be regarded as a description of advisory services provided by North Berkeley or performance returns of any North Berkeley client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. North Berkeley manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.