In our continuing efforts to communicate with you during these trying times, we wanted to give you an update with what is happening and our latest views of the market.
As March progressed, we witnessed the fastest bear market in history. From March 24-26, we witnessed a technical bull market. (A 20% increase from the most recent bottom.) This movement is the very definition of volatility, both upside and downside. Unfortunately, we remain confident this ‘mini bull’ will not last. Many people are asking the question, “When will people get to return back to work?” I think the more salient question for the economy is, “When will demand return?” There is still so much that needs to be determined because this is a financial crisis inextricably tied to a health crisis.
Now here is some good news… The Federal Reserve and the Treasury acted quickly to implement massive action in the credit and bond markets to ensure liquidity. At the depths of the bear market, credit markets were starting to waver because of the rare, intense selling pressure. Even some of the historically safest bond funds were losing value because institutions were selling anything they could to raise cash. The actions from the Fed and Treasury have calmed these markets and we’ve been seeing the benefit in the stock market as well.
Speaking of the Fed and Treasury, they have hired Blackrock to implement the new bond purchasing program. Yes, the same Aladdin technology that we use to risk-analyze your portfolios is being utilized by the Federal government again to help them manage a multi-billion dollar program.
So, where does this leave us? We remain highly cautious with your money. During the dramatic downturn in the middle of March, we made some trades out of underperforming assets to generate cash. We have worked tirelessly with the folks at Blackrock to update our models to position you for a solid rebound. As the bond markets recover, this will give us the dry powder to buy back into stocks when we rebalance shortly. The changes coming to your portfolio will slant towards stocks that have strong balance sheets and high return on equity. Timing the market is almost impossible, but we will do our best to make the trades when market conditions make sense. We remain nimble and able to act on any given day.
As always, the FFP team is here for any financial questions. We look forward to helping you during these challenging times. Be smart and stay safe!
Mike, Judy and the FFP Team