We commented last Friday on the recent market volatility
driven by Corona virus fears and uncertainty. We believe these anxieties are
valid but when looking at the history of the past 50 years or so, we have had
multiple viral outbreak episodes from which the stock market has always
recovered and moved on to higher levels. As we stated Friday, we believe this
will be the case with Corona. Like everyone else, we do not know how long this
will take to play out, it could be several months or more. But as history
shows, these events have historically been buying opportunities. Regardless, as
we stated Friday, your financial plans incorporate the impacts of market
volatility and your portfolios are designed, through their diversification, to
mitigate stock market risk.
With this in mind, our investment committee met on Monday
to assess this situation and possible further risks it may place on client
portfolios. One action we took following our meeting on Monday was to eliminate
our holding in the Transportation stock ETF (IYT) and move those funds into the
Healthcare Technology ETF (IHI). We did this because we believe earnings
reports for transportation stocks (particularly airlines and trucking
companies) may be rather ugly over the next couple of quarters and there is
higher likelihood of further downside resulting from these quarterly earnings
reports. By re-allocating this money to IHI, we believe we are accomplishing
several objectives: 1) reducing exposure to companies that would suffer from
the corona situation to companies that will benefit from it; 2) moving money into a higher and more stable
growth sector; and 3) moving funds into a far less volatile sector of the
market.
We also discussed a number of additional possible actions
at the meeting but came to the conclusion that it was not prudent or necessary
to make further changes at this time. We will be holding our 2Q investment
strategy meeting later this month and at that time will re-assess the situation
and take actions on any strategic rebalancing we feel may be necessary at that
time.
As always, if you have questions or concerns, please do
not hesitate to contact us.
S. R. Schill & Associates
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