Portfolio Update

We hope you are all are having a safe and healthy summer as our economy begins to slowly reopen. We wanted to email you today and let you know we are beginning to take some additional action in the equity portion of your portfolio. Specifically, we are re-investing the portion your account that is held in equities.

The last week in the market has brought volatility after seeing the market go up significantly during the first part of June. We believe the current down trend is the result of the market going up too far and fast and that this current correction is moderating. We believe the actions of the Federal Reserve along with the federal government’s fiscal response to the economic damage caused by the pandemic are protecting the market from more severe losses. Therefore, we believe it is time to get back to our equity allocation.

Last week Federal Reserve Chairman Powell stated that the economy faced a "long road” to recovery despite an unexpectedly positive jobs report for May. The Federal Reserve announced on Wednesday that it would hold rates near zero, with no plans to hike rates until at least 2022.[i] Today the Federal Reserve stated that it will begin buying individual corporate bonds. Previously, the central bank had been buying on ETF’s and had said that it would be buying individual issuance on the primary market. [ii] The Federal Reserve continues to tell the world that they will do all they can to help strengthen the economy. These accounts seem to account for the two day rally we have seen on Friday and today.

Last week Treasury Secretary Mnuchin told CNBC that "we can’t shut down the economy again”.[iii] This statement reduces the risk of another nationwide economic shutdown if we have another spike of Covid 19 infections.

The Federal Reserve’s willingness to provide unlimited support to the economy and the Administration’s commitment to keep the economy open are both rather bullish for the stock market. Therefore, we are trying to use this current pull back in the stock market as a buying opportunity. Over the last few weeks we have been working on what the equity portion of your portfolio should look like when it is time to re-invest in equities. We have put together a well diversified portfolio of mutual funds. These funds are all in the top of their pier group according to the Morningstar peer group rankings. We will continue to use the Morgan Stanley Insight Fund (which has been a great large cap growth fund throughout this period), Federated Kaufman Small Cap Fund, and the Calvert Small Cap Fund. Most accounts have substantial gains in these holdings and these funds remain in the top of their peer group. With the remaining portion of your account that is to be invested in equity we will be adding three additional funds to get back to a fully invested position. This equity fund line up has consistently beat the benchmarks over a long period of time.

Let us know if you have any questions or comments. Stay safe and well!

Posted by Jeri on 6/15/2020 5:16:02 PM

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