So far, 2020 has been a year for the history books. Even the most cursory review of the past quarter includes more economic, social, and political data than you might expect from an entire year! All of this can become overwhelming and confusing, but during periods of volatility, we are thankful that we have a process-driven approach to investing that shifts our focus from short-term outcomes to long-term goals. This focus was the entire topic of last quarter’s commentary, titled “Markets in Crisis: Using the Past as Our Guide.”
We are maintaining our view to remain neutral to targets on all portfolio recommendations, which means we intend to add to equity positions when prices are low and sell when prices are high. These decisions, when they are implemented, are not made in a vacuum. Quite the contrary – we are closely tracking how the delta (rate of change) of earnings projections moves up or down with COVID-19 case rates. Tracking this data led us to move forward on April 13th with our decision to rebalance and add to equity positions at that time.
Now, our focus on data is tied to next year’s earnings projections compared to today’s prices. The daily events surrounding COVID-19 seem to be the biggest driver of what the next year could look like for our economy. Maintaining a neutral stance to target allocations could change if mortality rates increase. The good news is that, so far, we are not seeing this happen.
We cannot let this quarter conclude without a reference to the civil unrest taking place in our country today. It is disheartening to witness this level of discord on so many different levels. We have become a society of people whose voices are getting drowned out by the extremes on the fringe, who feel the need to ridicule and attack instead of problem-solving in a respectful way. In so many ways, it is feeling like this challenge is bigger than any we’ve outlined above. It is our hope that all voices of reason can be heard, and that meaningful progress can be made in a peaceful manner.
The team at Resolute wishes you and those you care most about a safe and enjoyable second half of 2020.