Our Response to the Coronavirus Outbreak

We have just experienced two very unsettling weeks, both from a world health perspective and an investment perspective. In light of this pandemic’s unknown scale, duration and toll, we understand that being fearful makes sense. But we also know that panic is neither a plan nor an investment discipline.

For 25 years, our job has been to provide steady and calm wealth management advice you can trustA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process. when it matters most—like right now. On that note, we want to share what we know so far, how we’re responding and where we anticipate we may be in the weeks to come.

First, let’s be perfectly clear: It’s fear and uncertainty that are currently driving investment markets down rather than a reasoned assessment of the state of our economy or corporate balance sheets or the probability against a positive outcome over the longer run.

We are open for business and we stand ready to take your calls, respond to your emails and provide the investment counsel that you’ve come to expect.

Fear tends to fill the vacuum when information is scarce; the lack of hard facts has created a gripping kind of fright that is rare. We think the federal government (and global equivalents) have been slow to acknowledge and respond to the scale of this crisis. We know that we don’t have a clear picture of how many Americans are ill, how quickly the disease is spreading and what the ultimate economic and market toll will be.

Clearly, however, the rising number of school and office closures, canceled travel plans and postponed public events doesn’t bode well for near-term confidence or consumer activity—both important drivers of our economy. The bottom line: A recession seems likely, but it’s impossible to predict the extent and duration of the coronavirus’ societal or economic damage. Nor is it possible to predict how long or short a recession driven by a viral outbreak that could take months to contain might last.

If that is what we don’t know, here is what we do know:

• The stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. market is down significantly, yes. That means at least some (and maybe too much) of the negative impact of the virus is being priced in. Even if it turns out in hindsight that traders are overreacting today, they could continue to overreact for the near term. But that’s just short-term thinking.
• Disciplined diversificationA strategy for managing investment risk by investing in a mixture of different investments. Since different asset classes face different risks, even if one type of asset declines in value, others may not. helps mitigate some of the downside riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline., which is why we build diversified portfolios. That means we invest our portfolios across sectors and geographies. And depending on your risk comfort zone, we hold stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company., bondsA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. and cash to varying degrees. BondsA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. are doing precisely what we expect them to do—acting as shock absorbers to help weather periods of volatilityA measure of how large the changes in an asset’s price are. The more volatile an asset, the more likely that its price will experience sharp rises and steep drops over time. The more volatile an asset is, the riskier it is to invest in. and down markets like the ones we’re seeing today.
• Times like these are why professional advisers recommend investors have a “rainy day” fund as part of your financial plan. Cash and short-term bonds provide the necessary spending power all investors need to weather stormy stock markets. Let us know if you are feeling uncomfortable and would like to review your rainy-day fund, your financial plan or the level of risk in your portfolio.
• As a company, we have prepared for just such an emergency, and are implementing those plans now, as needed. Our staff have long had work-from-home technology and they are using it. All of our day-to-day operations are carrying on as normal. Though we have limited staff on-site, we are open for business and we stand ready to take your calls, respond to your emails and provide the investment counsel that you’ve come to expect. (If you were planning to visit the office, please confirm the appointment ahead of time.)

No pandemic in history, however dire, has lasted forever. And market rebounds following abrupt shocks are often swift. For long-term investors like us, staying the course doesn’t mean staying still, and you may see some trades in your accounts in the weeks ahead. Staying disciplined, diversified and invested with portfolio managers who can take advantage of sell-offs when there’s an advantage to be gained is our game plan. In the present, bear marketsA period in which stock prices decline significantly from recent highs and remain below previous high marks for weeks or months. Generally, a decline of at least 20% in stock prices is considered the threshold marking the start of a bear market. always appear dangerous, but in the rearview mirror, they are most often remembered as wealth-building opportunities.

Please contact us with any questions or concerns you have—we are here to help guide you through the worst of times to better ones.

As advisers and wealth managers, we are experienced stewards of your hard-won savings and long-term investments. And we are invested alongside you, owning the very same funds and relying on the very same portfolio managers as you do to meet our long-term investment objectives. We are tireless in our risk-aware pursuit of well-reasoned and reasonable long-term results. We take our jobs as fiduciariesA person or organization who manages assets for a third party, and is legally bound to act in the best interests of that third party, putting the third party’s interest before their own. extremely seriously.

Please contact us with any questions or concerns you have—we are here to help guide you through the worst of times to better ones. No matter how tough the going gets, we won’t back down. Instead, we’ll be here for you every step of the way through this current crisis to the inevitable recovery.

Daniel F. Silver President and CEO	Daniel P. Wiener Chairman	James H. Lowell III Chief Investment Officer