March 16 Market Update

At a time when market volatility and emotions are high, we want to offer some facts about your portfolios and the market.

Where we are:

  • This is a health crisis. As confirmed cases rise worldwide, every community is being affected. We do not expect the US economy to improve until after the coronavirus death counts peak, as we have seen with previous patterns around pandemics.
  • This is an economic crisis. Containment measures such as social distancing are set to deliver a sharp and deep economic shock to global activity. This may push Japan and the Euro area into a recession (two consecutive quarters of economic contraction). The U.S. will likely prove more resilient relative to other economies.
  • This is a financial crisis. This is not 2008, however. The Federal Reserve will effectively print money once again, and massive fiscal programs are likely to follow. We expect a recovery in activity once disruptions dissipate, but uncertainty about the duration could weigh on consumers and business leaders in the short-term.

What is Sendero doing?

Along with already having a lower weight to equities than our Strategic allocation, we are raising cash in portfolios by selling all inflation and/or short-term fixed income credit strategies.

Although we made the change to Treasury-only money market funds a few years ago, we are going thru the discipline of reviewing all our cash options.

We are talking daily to the managers that are investing on your behalf about portfolio activity. We are happy to share their thoughts with you at any time

We are in conversations, daily, with our network of experts. This is where having access to active and intellectually independent investors can make a positive difference to your portfolio over the long-term.

We are not timing the market. Going forward, but not yet, expect disciplined rebalancing from bonds into equities as equity prices become more attractive. Based on the history shown below, it may be weeks or months away, but most of the decline could be behind us.

We are looking at history for guidance. According to the National Bureau of Economic Research, there have been 17 recessions in the United States and the median S&P 500 peak-to-through decline during those recessions was 27.1% over an average decline period of 15 months. As of today’s close, the S&P 500 is down 29.6% peak-to-through.

Finally, while sudden and deep market downturns are unsettling, US equity returns following sharp declines have been positive, as this data from Dimensional shows:

Be safe and let’s remember to be a good neighbor.

If you have any questions or want to have a conversation about the market or your portfolio, please contact Liz, Ed, Fred, Scott, Tyler or myself. Your Sendero team is ready to help.

Best Regards,

Amaury de Barros Conti