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good morning everyone thanks for taking time out of your day on a hectic day another busy one in financial markets appreciate you joining us with me on the call is Rebecca Robinson Rebecca are you there I'm here can you hear me yes all right great well good morning and thank you everybody for joining us today for a regular market update especially in a day that likely feels far from normal as we start these calls we always like to stress that our wealth management team genuinely believes in the power of long term investing but we also know in times like these it's natural to have concerns and we think most of us are wired to kind of flee when facing tough times we know it's a difficult environment and while it's a little bit scary we also really believe that it's temporary so our goal today is to share with you some info insights on what informs that belief as we'll cover with you today I think it is important to keep in mind that we have seen times like these before on many occasions and I think well one of my favorite statements this too shall pass it might seem a little bit hollow or naive right now we do need to remember that it's fairly common for stocks to enter bear market territory without that being an indicator of a recession and I think though it's difficult sometimes to focus on the long term we do believe this is one of these situations where eventually we will look back as a unique opportunity if we think back to 2008 I think it was likely difficult at that time to envision ourselves in a positive position in the future and it was very hard to see sort of the green shoots when few of us could really envision the emergence of a positive market coming out of such a deep financial crisis but for those who sold in a market storm unfortunately really never remember when the clouds lift and that's why as we look at our investment philosophy we really do believe that having a plan knowing what that plan is and sticking to it and then relying on those that you seek advice from your advisors and your bankers is really really critical so today I'm joined by anthe Valeri Anthea is a director of investment management for Zion vancour Wealth Management he is a chartered financial analyst and he leads the investment committee for our organization Anthony has very very extensive industry experience and he has shared this expertise on multiple national news channels including Bloomberg Fox News and CNN just to name a few anthe is going to give you some insight into our current perspectives on the market as well as going to address some of what we're doing with regard to recent market turmoil so with that I will hand the call over to Anthony Valeri all right thanks very much Rebecca and thanks again everyone for joining what I'd like to do is take the next 25 minutes or so to give you our thoughts on the market and where we stand with coronavirus also this recent oil news and how we view financial markets and what to expect going forward this call will be recorded and available online so just just so you know that please contact your wealth management professional if you need access to it at a later date but why don't we go ahead and get started with our summary points here the number of corona virus cases in China is is decreasing but globally increasing specifically in Europe most notably in Italy where the entire country is on a lockdown and it will be increasing in the US as well is increasing in the US and a lot of this has led to fears over just what is the economic impact of these lockdowns of regional areas across the globe the oil price war that news came out over the weekend comes at a very bad time that while that's positive for the US consumer at the margin it's a negative from financial markets due to possible stresses in the high-yield bond market I will talk about that more in a moment I think what we're seeing is historic I think will look back on this as one of these moments that one of the more severe pull backs in a combination news at work to that note stocks are down nearly 20 percent actually as of this morning stocks are down and that number is 18 percent that's near the bear market territory or threshold that 20% signifies bad news is priced into the markets in my opinion including an increased risk of recession but when you do have these types of conditions they usually don't unwind themselves very quickly so it does take time it takes patience and I'll talk more about that we are seeing signs of selling extremes those tend to be contrarian indicators so when people rush to the door to get out there's panic that can usually set the stage for an ultimate investable ization in subsequent rally but I don't think those indicators are broad enough yet to suggest that there is truly that selling exhaustion and the markets ready to move forward so I you know I think the bulk of the damage is done but there's more work to do separately the White House is considering various stimulus measures to aid specific workers and industries that are affected we were supposed to get an announcement yesterday that did not happen and I think that's part of the reason why markets are lower today and the Federal Reserve is widely expected to cut rates again and may even go beyond that with restarting lending programs and at the extreme even restart certain bond purchases I'll talk more about that as well Kareem episode is a lot like what was witnessed in 2011 the 2015-16 sell-off and of course late 2018 we think this will pass and we strongly encourage investors to remain committed to a disciplined investment strategy now let's get into the details and I want to talk a little bit about what areas of the economy are most specifically impacted by all of this and specifically travel energy and hospitality are really the areas that are most directly impacted by the coronavirus this is a hotel occupancy you'll see the impact across Asia and also in Italy this is likely to get worse in terms of in countries across the globe us included you're starting to see cancellations of major events in Europe sporting events are now going to be held without fans so there's there is an impact to the industry there and travel and hospitality that's where you're most likely to get that impact as well you're seeing it in the airline industry as well so global air traffic at risk of seeing it's long decline on record so a sharp downturn in terms of bookings and most of this coming from Asian airlines you're not seeing a huge change in US airlines as of yet but it could certainly start to impact US airlines as well so this is the these are the first two sides of data where the impact of the corona virus is showing and again this is likely to show up more and more in economic data globally as time moves on but again we'll probably see more of that over the rest of the first quarter but primarily in the second quarter in terms of the corona virus itself efforts to contain the virus in Asia are working and so the number of new cases both in China and in South Korea are decelerating so it's good news from that perspective you're starting to see activity in China pick up again but the bad news is that you we're going to see an acceleration a continued acceleration in both Europe and the US this week oddly enough marks the week in which US testing is really supposed to ramp up and I think as testing ramps up you're going to see many more cases announced and publicized here in the US that's going to be a negative headline for investors to fight through you'll likely see increasing headlines out of Europe as well so the news is going to get worse before it gets better particularly due to the increases both in Europe and the in the US and that's going to obviously increase the potential for business closures lock downs and those have knock-on effects to consumer spending and obviously the greater economy so we'll be on watch for that economic forecasts are coming down for the full year and even globally the OECD it put out their forecasts and I think this will come down even more they've reduced global growth as a result of the coronavirus I think this will come down even more this will be the slowest likely be the floa space of economic growth globally since the financial crisis in 2008 and recovery in 2009 so there will be an impact Europe just a note here the near-term recession risks have certainly increased and that's particularly so for Europe Italy was already you know just barely in recession territory at the end of last year they are likely to fall into recession there's a good risk for Germany which had also narrow had narrowly avoided recession to fall into recession here in 2020 so there's there's a very distinct chance Europe falls into recession as a result of this and potential closures for the u.s. recession risk has certainly increased I think the biggest impacted economy will come in the second quarter but most of this most of the data we see points to a recovery in the second half and into 2020 so the impact from coronavirus likely to be sharp likely to potentially be significant but much of that concentrated in the March through June period absence of real pandemic or global spreading which I still think is a low case probability so definitely be on guard I think the news for the economy is to slow down it could get worse before it gets better and ironically a lot of this bad news on the economy and the potential for increased recession risk is starting to impact the potential election outcome this is data from predicted which is sort of the kind of money or odds for a potential winner for a variety of political seats I just chose the one for the White House who will win by political party and the odds for a Democrat to win the White House have improved over the past 10 days or so I think a lot of this just do the economic outlook no incumbent president has really survived a recession and been reelected so as recession risks increase that threatens the potential change at the White House so that's just one more factor when we're uncertainty that I think is contributing to the sell-off and for those of you that did attend our 2020 outlook you'll know that I mentioned that an election year typically sees more volatility especially over the first six months of a presidential election year and I got this is holding true to form but again this is one more factor that tends to keep that trend intact so something to watch another factor of uncertainty as we move forward and I think we'll just take time to work through the market's economic data I rot oddly enough before the impact of the corona virus was improving and improving it a pretty good clip and so far really not seeing any impact to the US data we'll keep an eye on some of the economic reports starting next week the March 16th will be the first regional survey that will really cover the period in which the corona virus impacted the US but this is the Citigroup US economic surprise index and when economic reports beat consensus forecast this line increases conversely when data is weaker than the consensus you see the line decrease and you can see the sharp increase since the beginning of 2020 the data reports that basically beaten expectations the probably the one that most notably sticks out is last Friday's employment report very strong report over 270,000 payrolls added on the jobs front you look at housing data had been stronger than expected both is M indices and these are surveys of both the manufacturing sector and the service sector had shown improvement as well so a budding improvement in the economic data certainly relative to expectations was going to create what looked to be better than expected growth for the first quarter on a historical basis nothing you know that would stand out too much but when expectations were about one and a half two percent it looked like GDP growth was going to exceed two percent but given what's happened in the with regards to the coronavirus that is old news to some degree and again some of the economic data points starting next week and through the remainder of the second quarter will be closely scrutinized to see the potential impact of that slowdown again not seeing any signs of a recession we'll continue to keep an eye out for that again I think this will be more of a hit to the late first quarter second quarter growth and ultimately a rebound later in the year let me switch to oil prices now that was big news over the weekend and I want to highlight that energy is a much smaller part of the overall US economy and what this chart shows is energy exploration and mining as a percentage of the US economy in 2015 which was really a year where I think the shale industry and domestic oil had probably reached an excess the energy exploration of mining was about just over 11% of the US economy in terms of GDP now that's just over 5% so a little more than half of what it was back in 2015 so really no excess in the energy sector that this drop in oil prices could have that material an impact we'd have seen this before rushing Russia in Saudi Arabia and other members of OPEC fought over supply limits in 2015 they did flood the market with oil back then whether this was an attempt to sort of undermine the US shale industry it didn't work then and it's unlikely to work now yes there may be bankruptcies in the energy sector I think that's the next watch out but ultimately those stronger players will will survive and we'll still have a shale industry here in the US so there are some knock-on effects to that if there are bankruptcies if there are closures that will be a drag on the US economy it's something to watch but ultimately I don't think this really changes a whole lot other than being a dampener to economic growth and of course one more worry for financial markets there are knock-on effects to the decline in oil it is a big part of consumer price index or inflation measures so the lower oil will lead to lower inflation which in turn will lead to lower bond yields and will also make it likely to lower bond yields or interest rates persist it will be one less catalyst to push rates higher in the future if inflation stays low so there are some knock-on effects of course the consumer benefits as well from lower energy prices India of all countries also benefits as a big consumer of outside energy will benefit as well so there there are some benefits here I don't think but again the impotence the US oil is now because the shale industry a part of the US economy I think there will be some knock-on effects by the way on a separate note oil prices when they are down just over 50 percent from the peak has generally been positive for the US equity market that's only happened eight times previously in six out of the prior eight times the market was up double digits over the subsequent 12 months so potentially a little those lower costs could be a catalyst in the longer term for the US economy in the US consumer one area that we are watching more closely in terms of energy where we think the potential knock-on might be is in the high-yield market the energy sector is about 14% of the u.s. high-yield market and it's important to realize that if there is a disturbance in credit markets it can reverberate through to the rest of the economy higher borrowing costs can therefore ultimately slow down the economy and sort of a secondary in a sort of a secondary way and we are watching that closely so far the damage is primarily constrained to the energy sector what you see here is a rise in the average yield spread of high-yield bonds to Treasuries and that's gone up close to 6% you can see it's below the 2016 peak which almost hit 9% and if you go back to 2011 that almost reached 9% as well so compared to recent relative events in 2011 by the way was the European debt crisis it's also when the US Treasury rating was downgraded 2016 was the energy crisis I spoke of both those periods saw significantly much more weakness in the high-yield market it's possible we get close to that level but credit markets in general are much more well behaved and I think this is a signal that the the bond market is really not overly worried about the coronavirus or the potential oil impact certainly something to wa
ch I would expect spreads to go a little bit wider they're slightly above the long-term average of five for saying currently but again relative calm here and it's something we continue to watch I think it'll be constrained to the energy sector but this is one area again we'll watch we'll see if there's a reverberation to the broader credit markets central banks around the world are providing stimulus and you look at the countries in pink there have cut rates if you look at Europe you can see note rate cuts however the European Central Bank is meeting tomorrow the Bank of England met today and cut rates the European Central Bank it's unsure whether they cut rates because their overnight rate is already negative however they may Institute various lending programs that are targeted to small to medium businesses so that they can more easily adapt to the shutdowns in Europe that a result of the coronavirus so look for some lending facilities which I think will provide some help and this is just one way of how central banks are doing what they can to ease the impact of the coronavirus on local economies so there is action being taken on them by central banks to help ease this burden and I think this will be helpful even though rates are low at the margin this will help and if you look at the US Fed there are big expectations of rate cuts in the u.s. now the Federal Reserve is expected we'll be meeting next week and they are widely expected to cut rates again another 50 basis points worth of rate cuts expected next week that would take it to about 75 basis points on the overnight rate and then you can see this line here which shows where the implied Fed Funds rate and this is measured by futures lies at various points you know in the future and you can see a steady decline ultimately the futures market is saying the Fed is going to cut back almost to zero by June of this year so another half a percent expected next week another rate cut expected at the end of April and where there are three rate cuts basically priced in by the end of April so I'm pretty aggressive expectations from the Fed buy the bond market and again if you look out the further right you go you look at 2021 those rates are expected to stay low for quite some time these expectations will change but it just shows you that the bond market really asking the Fed to cut rates they probably will follow through by the way you haven't heard for everybody from the Fed this week and you won't it's known but they are normally in a blackout period ahead of any meeting so their next meeting you won't hear from then until the meeting itself conclusion of that next Wednesday also if it's don't be surprised to hear of other measures it's possible the Fed could start a lending facility like they did during 2008 they at the extreme restart mortgage-backed bond purchases to help consumers although the drop in Treasury rates has been dramatic and many folks certainly colleagues I work with have tried to refinance you are getting better rates but the drop in rates hasn't mirrored what's happened in the Treasury market so to aid that you may see the Fed restart mortgage / mortgage-backed bond purchases I think that's more of an extreme but that's one measure that they could take to sort of ease the economy through this slowdown and because of those Fed rate hike expectations and also the downdraft to growth you're seeing a historically large change in bond yields almost a full percentage point drop across the maturity spectrum and you can see the dramatic shift just from the middle of February to the close of business on Monday just a big big drop across the board at one point the entire the entire maturity spectrum was less yielding less than 1% so fairly significant we had expected bonds to do about two to three percent for the full year they're exceeding that before this downdraft and yields unfortunately does have longer-term implications for bonds so we're expecting lower returns in the one to one-and-a-half percent range for the broad bond market not just Treasuries but again big move in in the bond market I think a lot of this reflects the fact that from an investment perspective the only true offset to risk our Treasuries and high-quality bonds and I think there's been a rush from investors and from hedge funds to really hedge that risk on the equity side with fixed income high quality fixed income and I think that's exacerbated this move but with the Fed poised to cut rates we're looking at low interest rates here and also oil coming down we're looking at low interest rates for an extended period of time so big and extraordinary moves in the bond market here again the Fed is likely to provide some assistance as our other central banks what our government's going to do I talked about fiscal policy assistance and that is likely coming the markets clamoring for that it's not uncommon here's a table of prior fiscal policy assistance in recent years a lot of what's been talked about for the current episode is to provide a payroll tax cut and this doesn't provide a lot of money but it can be significant at the margin it's going to help us household you can see prior episodes vary from about 600 to $1,000 per household depending on the specific cut whether it's a payroll tax cut or a tax rebate I think investors are looking for something a little more targeted towards the travel and hospitality industry here or workers that may not be able to work just due to lock downs and closures so I think that's what the markets want we'll see what comes up a bit by the way there was eight point three billion approved last week that was aid specific to the healthcare industry to help contain the coronavirus develop vaccines that that'll be spent slowly over the coming 12 months so that is separate again investors looking for some sort of stimulus I think will get it it's just depending on whether it's extensive enough to sort of please investors and help aid the rebound in the market by the way after September 11 the airline industry and this is an example of what we could see the airline industry receive financial aid from the government so that's the type of assistance I think investors would really like to see from the White House but we'll keep an eye on that but again that's what the markets are looking for and then let me turn to one of my favorite charts in terms of investing and I'll spend more time now more on the direct impacts on the stock market and what we expect really important to understand that volatility is a normal part of investing it's never fun it's uncomfortable it doesn't make you certainly doesn't make me or anyone else feel good when you have these sharp Swift declines but it's important to realize that volatility is almost an annual is an annual occurrence in financial markets so this chart shows two things one the calendar year return of the US stock market all the way back to 1980 those are the dark blue bars and then the entry year decline is demarked by the red dots and numbers so what was the maximum peak to trough decline in the stock market during any calendar year and and it might surprise you to note that that average decline is almost 14 it's actually thirteen point seven to be exact so although the average entry year decline is almost fourteen percent most years finished positive so thirty out of the last forty have finished positive that's a 75% success rate so despite that intra year volatility you tend to have positive finishes so it's just important to not lose sight of the fact that declines are a normal part of investing it's it you just have to take it as part of the they're difficult but it is a normal part of investing let me move to the stock market and valuations so the market had entered this current period expensive that is no longer the case the most commonly watched valuation metric the price to earnings ratio is now at eighteen actually just below that as of today and roughly in line or slightly below the ten this fifteen year period average and it's not far off the longer-term or roughly slightly below the longer-term average as well if I was to use 25 or 30 years worth of data and you can see at the current p/e ratio it's rarely been lower since 2016 so the argument that stocks are expensive is certainly no longer valued no bit longer valid and I do think we are very close to fair value here it's the uncertainty over corporate profits and the potential impact that is still affecting investors but from a valuation standpoint back to what I think is fair value pretty close to it and keep in mind that the p/e ratio when interest rates are low and that's definitely the case today the p/e ratio is generally above average because the lower interest rates make bonds less attractive relative to stocks so valuations have corrected I think they're close to fair value the the missing part is what happens to profits and I'm a big believer that over the long term its profit growth that drives stocks not the economy and profit growth for this year was expected to be in the we expected to be about three to five percent now with this potential impact the economy it's possible that earnings growth could be zero or even decline and so what I've done is looked at sp500 price levels relative the change in profits so if you look at the third column from the left zero percent growth in other words if profits don't grow at all if they instead of growing 5% they grow zero you can see a number various numbers they're corresponding to a p/e ratio so if you look to the left and you go to the 18 for p/e ratio and then to the column under zero it shows 2934 as a potential fair value level for the sp500 if that is the ultimate profit growth and the SP as of Monday's close was twenty seconds call it twenty seven fifty was below that so that would tell you it's slightly cheap relative to fair value conversely if profits decline about five percent then that number that fair value drops to about twenty seven eighty seven which is roughly where we are now using the same 18 p/e ratio that red box sort of outlines what I think is sort of a general target range of fair value for the sp500 and it lines up with sort of our p/e ratio analysis the two boxes are highlighted in grey are really what I call the more pessimistic scenario so if the economic contraction is sharper and profits declined 10% now no one is calling like zone once Wall Street Bank calling for ten percent decline in profits this year but that's a pretty pessimistic scenario and in that case I could see the SP dropping down more to twenty four ninety four so let's call it twenty five hundred which is another nine percent lower than where we are currently that would be a bear market and that would be a pretty severe correction don't want to I hope that doesn't happen but I think that's more of a pessimistic case for investors to keep in mind and ultimately you know if you had the analysis how bad could this get that's possibly where it could go the 16 p/e ratio which is the first line that's very very rare to see that kind of metric on the stock market so I don't see the Index falling to that level under various profit scenarios but again this is where we're watching to see what profits do I still think flat profit growth is zero percent is a more likely outcome this year so I think again the stocks are close to them fair value just need to see some momentum clear out of the market and we will update this for periodically throughout the year to see how that profit growth is developing so far companies haven't really announced any profit or earnings productions we'll start seeing those here over the course of the coming weeks first quarter earnings season which probably won't be that impact it starts April 15th that'll be our first market to see how profits are developing on a shorter term basis however markets pricing a lot of negative news and it's important realizes how much is extreme in the market and one way to measure that is looking at how many insurance how many investors are buying insurance and you can measure that with the put to call ratio so the more investors buy puts which is downside protection the more signs of panic and extreme and typically when that put to call ratio spikes like it did in late 2018 also early 2018 if you go back to 2016 you also see a spike you see a spike around in 2007 late 2016 as well corresponding to the election all of those sort of began to mark a potential bottom in the market and as terms of an extreme you know check the box we're definitely seeing that with investors buying insurance here following this decline so this is a sign of an extreme it's usually a contrarian indicator and then when the markets get this panicky it's usually a good time to buy based on this metric alone there are other metrics CNN publishes a fear and greed index it is a at its one of its worst fear readings on record so there are definitely signs of extreme pessimism in the market and those are some of the necessary ingredients you need to ultimately get a bottom so we're starting to see those extremes that suggest that we're in the process of forming a bottom in the stock market but as you move forward there's still some measures that are not what we call fully flushed yet so the percentage of ESPE stocks that are down 20 percent from their 52 week high is about 47 percent currently actually that numbers a little bit higher following recent data and we'll see where it is after today but prior Peaks have come at about the 55 to 72 percent level so we'd like to see a little bit more of that pessimism reflected in a broader range of stock prices statistics say that look this has gotten pesum stick enough and again sets up a contrarian measure to where the stock market bounces so while a greater number is showing that pessimism there are some that don't fully respect that extreme pessimism I think we'll get there but it's just a matter of a little bit more time other metrics that we follow the Association of American investors they go out in sample investors and they asked him are you bullish or bearish the percentage bearish has increased steadily but is still below the level that has typically been associated with the bottom in the market pretty close but not quite there yet the numbers approaching 50% typically 60 to 70 marks of low in the market and then the other option the other factor we watch is buying power when the market rebounds when you look at the internals is it broad-based yesterday I can say that it was a first update despite some 2% updates last week where the breadth was very strong and we need to see several of those once that happens that's more of a clear sign that the market has likely bottom and just and is fully priced in for whatever negative news has come in so a couple of metrics several metrics that are showing yes this bottom is started it's starting to form but we have more work to do in my opinion on some of these other short term sort of sentiment measures in the market now it's not uncommon to have that I'm going to walk through a few slides that historically we've used to sort of guide through that in 2015 and 16 you can see there was a sharp sell-off August of 2015 this started with China devaluing its currency there was a retest of that low but ultimately it took several months it wasn't till February of 2016 that the markets ultimately bottomed and again this speaks to the fact that when you do have a violent sell-off it takes some time to work through the markets to see some of those extremes worked off doesn't always play out this way but this is one example 2011 was another example weakness started in late July of 2011 in response to the European debt crisis then the downgrade and it wasn't until a more robust fiscal policy response was enacted in Europe in October of that year that markets ultimately bounced higher so that took a couple months in 2011 and if you look at the 2008-2009 period similar example I don't expect a 2008 exam but the sell-off began in September of 2008 and ultimately it was march oh nine when the rebound started so again I don't expect it to be as severe by any stretch of two thousand eight or nine but just goes to show you that these shortest sharp violent
pull backs often take a while to work through 2018 was I think an exception to that rule a lot of it over fed fear and some hedge funds selling which by the way when we do have automated markets I mean it's selling ETFs unfortunately these sell offs can go a little further than fundamentals might dictate just simply to the dynamics of the market but I will say in the today's market unlike 2008 or even prior episodes there is no excessive leverage the banks are in far better shape than they were in 2007 and eight there is no bubble in housing if anything the housing industry is still very strong and there's no investment overbuild like tech and telecom as was the case in 1990s so really no excess in the economy that would trigger a severe downturn and again I think the impact will be more short-term in nature and another way to measure those sort of stresses in the market place in 2008 you could see with the swap rate increase this is a little inside baseball for those of us in the market but basically this is the measure of risk between financial counterparties so if you are a borrower in the financial marketplace and you're worried about the financial strength of somebody who are borrowing funds from you ask more in terms of a spread or rate you can see the spike in 2008 there was a mini spike in 2010 following the what we call the flash crash in May of that year in late 2011 that other sell-off I had mentioned also a spike but if you look where we are now on the far right side of this chart less than 20 basis points or two tenths of a percent so really no signs of stress in the funding markets that would indicate some sort of systemic failure in financial markets we're not seeing it there again wouldn't be surprised to see an energy bankruptcy as a result of the drop in oil prices but in terms of a broad economic stressor or bubble just not seeing that currently turning again to stocks and this is why I think the bottom is forming its in there is an unprecedented yield differential between stocks and bonds so if you're an investor and you're looking at longer term which we always stress with our with our clients that now is the valuation despite the pain we've seen in stock relative to bonds is very attractive the dividend yield and the sp500 now exceeds the ten-year Treasury yield by over 1% that is a bigger disparity than what was seen post the financial crisis you've seen this metric approach 1% on a few other occasions early 2012 and also early 2016 not coincidentally the last time that we had severe sell-off so the the signal that stocks are more attractive than bonds is certainly there there's other metrics where we measure it but on a long-term basis stock returns looking much more attractive relative to bonds and one reason why you should stay invested a few more charts on investing and this reflects our approach to be diversified and really have a good plan when it comes to investing we we are big believers in diversification International has been a laggard relative to US stocks but this chart shows the performance of international versus US stocks over the past 12 months the declining line means the u.s. is outperforming international and a rising line means that international is outperforming us and since this pullback started you can see developed international stocks outperformed US stocks by about almost 5 percentage points so usually it's a smaller part of the portfolio but at the margin you can see how this diversification is helping investors and it comes at a time that I think is obviously needed more importantly having some bonds which do get negative or did get negative headlines because of low yields but they still work as a diversifier perhaps less so in the future and will continue to provide thoughts on that but look at the out performance of bonds relative to stocks if you in mid-february they had underperformed stocks by about 10 percentage points there's been a massive 24 percentage point swing let me say that again 24 percentage points of out performance of bonds relative to stocks over just a few weeks that is just amazing and it just helps to show the diversification power of high-quality bonds to potential risk in stocks this is a big reason why an investor with a 60% stock 40% bond portfolio roughly is down about four to five percent year-to-date which yes that is negative but certainly far far less than the decline from stocks alone so it does show the power of diversification that's how we approach the investment world and let me just conclude with a with a few more thoughts here again for how you invest I mentioned the diversification for investors with longer-term three-year Plus horizons we would stay with a disciplined and diversified investment strategy you don't change now because of a blip this does happen volatility is normal continue to stay the course I think the only option to consider that we are looking at for client accounts is to rebalance and make sure those stock bond weights are truer to their longer-term targets and remember that timing the market is impossible I don't think this is a question of do I buy or sell now I always talk about investing as a process again it's impossible to time the market and for those trying to think about getting out now and getting back in that suggests that you are going to time the market correctly twice knowing to sell now and then knowing when to get back in avoid that habit understand that this is a part of the markets and if you have a investment program going I would continue to along with that and reinvest during this difficult time again that Corrections are trying and difficult by especially ones that are quick and sharp like the current one but it does time for patience and we believe strongly believe that you will reap rewarded over the long term as was the case following 2008 9 2011 and the 2015-16 and of course 2018 period so stayed stay invested continue to stick with that disciplined approach and I'd also mention we are here to help with questions or concerns please reach out to a wealth management professional we're happy to assist and we will continue to provide ongoing communications during this market pullback and our thoughts on the coronavirus and oil prices thanks again very much for joining I mean valerian again reach out we'll have a recording available online later today and again reach out to your wealth management participants for additional details thanks very much you
