Newport Private Wealth COVID-19 Update
We continue to provide brief updates on the COVID-19 outbreak, the impact on financial markets and our response.
Europe is now the epicenter of the COVID-19 virus. North American businesses, institutions and governments are taking decisive action to encourage “social distancing”, understanding it is the best course of action to slow the spread of the virus.
The U.S. Federal Reserve’s sudden and dramatic move to cut interest rates to near zero and inject liquidity into the system last night caught the markets off guard, fueling recession fears and sending global equity markets tumbling further into bear market territory.
Investment Committee Action
We entered this bear market with a reduced equity exposure and high cash weighting. Therefore, while the slide in equity markets is unnerving for investors, our portfolios are not as widely exposed.
Last week, we made a small cash allocation to dividend-paying equities. We anticipate that we will continue to carefully and incrementally chip away at buying equities, particularly those that our managers feel have been unfairly punished. We are in ongoing contact with our independent money managers about strategy and timing.
We would like to see a peaking of confirmed virus cases in North America before we take equities to a full allocation. Until then, the uncertainty will offer no relief to the markets. This peak could be protracted. We will be patient.
We also hold a significant weighting in private real estate – an asset class that should benefit significantly from lower interest rates and will be a hedge against the inflation resulting from fiscal stimulus.
While there is much talk of the “unprecedented” circumstances the world is facing our team has been through global financial shocks of many kinds over decades. Each one, in their time, was “unprecedented” – frightening for many and yet opportunistic for a few.
Ultimately, the threat and the uncertainty will end, and our lives and businesses will return to normal. In China, factory workers are returning to work and businesses, like Apple, are re-opening stores. The interruption to our lives and the global economy is significant, but not permanent.
The fundamental principles of common sense and sensitivity, reason and responsiveness point the way to resilience and recovery. Rest assured, Newport will move responsibly and professionally through this environment as it has in the past.
Although we are focused on the business issues before us, we are also mindful of the physical and emotional toll people are feeling in dealing with these circumstances. Again, please be safe. Take prudent steps to look after yourselves and your families. And where you see the opportunity, be open to giving or receiving help to slow the spread. We are stronger together.
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