What happened to my investment portfolio?!

March 01, 2020
This week, I was going to write about tax planning but I suspect most doctors are more interested in what’s going on in the markets. I hope you enjoy this quick summary of the past week. Also, if you’re going to be at SECO and want to say hello, just reply back to this email and I will buy you a cup of coffee!

The Stock Market
This week was the worst week in the stock market since the financial crisis in 2008. The Dow Jones Industrial Average (price weighted index of the 30 largest companies in the US) was down 12%. The S&P 500 (biggest 500 companies in the US) was down 11.5%. Of note, a “normal” S&P decline is 13.5% and lasts for 4 months. And AAPL, the darling of the US stock market, is off over 20% from its all-time high in mid-February.

I believe there are a lot of catalysts feeding stock market uncertainty (include the democratic primaries), but the main headline is the fluid and continuously changing global impact of the Coronavirus. Is it seasonal? Will other countries go through the quarantine and general shut down China did? How will it affect the global supply chain? Should they cancel SECO? Interestingly, since February 19th, the MCSI Emerging Markets Index (which in my opinion should be much more susceptible to the impact of the Coronavirus) is “only” down 8.4%.

The Bond Market
You may have seen Trump’s irate comments directed at the Fed for not lowering rates in response to this week’s activity. I get it- no incumbent candidate wants to run in a bad stock market! But where do they go and would it even help? 10-year treasury yields hit all-time lows EVER last week. A premise behind dropping rates is to make borrowing/investing more attractive for individual and companies, but really, when the 10-year treasury is at 1.16%, will lowering rates another 0.25% change the dynamic from pessimism to optimism? 

The search for yield (income) has been—and may yet continue to be—a driving force behind the stock market. Investors looking for returns aren’t finding them in the bond market (heck, high yield bonds AKA “junk bonds” are issuing in the 4% range), and higher quality, investment grade yields are gradually moving towards zero in some cases. In short, there aren’t a lot of options out there.

What’s an OD to do?
While there has been a lot of chatter about a recession and stock market pullback, the speed and cause of this week's downturn was unexpected and startling. As you look at your portfolio, think about the purpose and timing of your investments before pushing the sell button on stocks. And if you have dry powder available, talk with your advisor about whether this is a good time to dollar cost average in.

In good news, if your 30-year fixed rate mortgage is over 4%, call your mortgage broker about refinancing! I’ve seen 5-year ARM rates under 3%. It’s also worth checking on student loans rates, commercial real estate debt and practice loans to see if you can take advantage of this most recent rate decline.

At the end of the day (or in this case, the end of the week!) the best course of action is to breathe in, breathe out, and focus on what is in your control—refinancing debt, building wealth outside your practice by regularly investing for retirement and growing your practice.

 A quick clarification point from last week's newsletter. When referring to a $1mm in Gross Collected Revenue practice, I was suggesting that a doctor might expect to net after taxes $500,000 from a practice SALE, not annual revenue. Next week given no major market or world updates I'll take you through the math on how taxes and other costs add up when you sell your practice.

The views expressed here are as of the date of publication and are subject to change. This information should not be construed as investment advice. It is presented for information purposes only and is not intended to be either a specific offer (or recommendation) Hayes Wealth Advisors to sell or provide, or a specific invitation for any investor. Information herein may have been obtained from sources believed to be reliable, Hayes Wealth Advisors is unable to warrant its accuracy.
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