Accretive On: The Coronavirus

February 27, 2020

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Over the past month, the Coronavirus (also known as COVID-19) has come to dominate headlines, and over the last week has been the prevailing narrative surrounding the recent stock market weakness.  Given all of the uncertainty and fear, and the market approaching 10% correction territory, we thought we would share our take on the virus and how it should impact investment decisions for clients.  

We wrote about the Coronavirus in our last monthly update, which you can click here to read.  In our opinion, not much has changed in terms of anyone’s ability to make accurate predictions regarding this virus.  

We do, however, need to make some assumptions and those assumptions are based on what we know and what we think.  

So what do we know?

We know that the virus is spreading and that there is going to be some economic impact.  What we do not know is when the virus will run its course and be contained, and we do not know how much impact it may have before it is contained.  It is possible that the interruption tips foreign economies, and possibly the US, into a recession.  We know that public altering its behavior will have an effect on company results, which should be most observable in anything that touches the travel industry.  We also know that the virus is impacting the global supply chain, so some companies may be unable to meet demand.  Ultimately, what this creates is a lot of uncertainty.  In the market, when uncertainty rises stock prices tend to fall.  It’s kind of like physics.  

What do we think?

We think that the Coronavirus will ultimately run its course, but we do not know how long that will take.  We think that from an economic perspective, the effects of the virus could prove to be transitory or episodic in nature.  To the extent the virus leads to a sharper slow down, we would expect some kind of policy response.  That response could be fiscal (spending or tax cuts), monetary (rate cuts or further Fed balance sheet expansion), or some combination of the two.  We think that while the virus may turn out to be episodic and its effects one-time in nature, and thus less impactful over the intermediate and long-term, any policy response could have effects that are less transitory and more impactful over time.  

What are investors to do?  

Plenty of commentators will appear in the financial media encouraging investors to sell everything or make some other bold move with their portfolio.  We remind clients and readers that the financial media is in the attention getting business in order to sell advertising, and not the advice business.  Commentators and pundits are not invited to appear on financial television for their level-headed counsel, it is fear-mongering that sells.  

Not every setback or known risk requires that an investor do something to their portfolio.  We caution that increasing the number of decisions being made within a portfolio also increases the likelihood of making mistakes.  

Let’s say an investor knew that the Coronavirus situation was going to get a lot worse, and the market was going to fall further.  That investor would still be left with the decision on when to get back in.  Typical investors anchor to their beliefs and, as a result, that investor may not decide to get back in until the market is higher than where they got out.  In the end, the cost of a mistake may outweigh any gain from an initial correct decision.  

What’s our view?

In our view, it is a lot of wasted motion, as well as emotion, based on the questionable premise that one can reliably time the market.  In our experience, the average investor is not equipped to make those kinds of decisions.  We have encountered many smart people over the years sitting on the sidelines because of some event, (An election, the US credit downgrade, a European credit crisis, Brexit, a debt ceiling, a government shutdown, the US/China trade war, some geopolitical event, etc.), while watching the market climb a wall of worry and waiting for some pullback to get back in.  In summary, we think market timing is a loser’s game.  

If the recent volatility in the market has you rethinking the amount of risk you should be taking, and you feel the urge to do something, then now may be an appropriate time to revisit your long-term asset allocation.  Any changes should be made in the context of your long-term financial goals and objectives, not as a result of recent headlines.

We would welcome the opportunity to speak with you and review your portfolio to see if the risk being assumed aligns with your willingness and ability to take such risk.

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Accretive Wealth Partners, LLC (“Accretive Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Accretive Wealth and its representatives are properly licensed or exempt from licensure.This commentary is a general communication and the information contained herein is being provided for educational and informational purposes only. This commentary does not constitute investment advice and it should not be relied on as such. It is not intended to be and should not be considered a solicitation to buy or an offer to sell a security or a recommendation for any specific investment product, strategy, security or any other purpose. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. Any examples used are generic, hypothetical and for illustration purposes only. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation.Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions that are solely the opinion of Accretive Wealth and should not be construed as indicative of actual events that will occur.Any performance presented herein is for illustrative purposes only. Past performance shown is not indicative of future results, which could differ substantially.  Current data may differ from data quoted.The views and strategies described herein may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities or gain exposure to such asset classes and financial markets.Information contained herein that is not proprietary to Accretive Wealth has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Accretive Wealth.For additional information, please visit our website at