by Scott Ronalds
New CEOs are often evaluated after their first 100 days on the job. What did they accomplish? What changes did they enact? Did they have a plan and stick to it? Without a doubt, it can be a stressful measurement period — Raymond Chabot Grant Thornton, a consultancy, suggests that 30% of managers don’t make it through the first 100 days.
The World Health Organization (WHO) declared COVID-19 a pandemic on March 11. One hundred days have now passed. For investors, this period has provided an equally harrowing measuring stick. The economy has cratered, companies have had to reinvent themselves, and stocks have both plunged and soared.
The good news is that much of the early damage has been reversed. The U.S. market has recaptured almost all of its losses, while most markets in Canada, Europe and Asia are down less than 10% year-to-date (the rebound, albeit, has been uneven). Balanced portfolios at Steadyhand are almost even on the year. In a word, the bounce back has been remarkable. But how would your review look after the first 100 days as CEO of your portfolio in a pandemic?
If you were anxious and scared, you were human. But if you didn’t succumb to panic or make any rash changes to your accounts, congratulations. You just survived one of the most challenging and unusual 3-month periods in stock market history. Going forward, your focus should be on sticking to your plan, as cliché as it may sound.
If your investing psyche is heavily scarred, on the other hand, and you don’t think you can stay the course or handle the level of volatility you’ve just experienced, you’ve learned a valuable lesson (hopefully at little cost) and may want to think about dialing down your overall risk, rather than making a radical change. The market rebound has been significant and offers an opportunity to reassess your strategic asset mix, or SAM, which is your breakdown between stocks and fixed income.
If you’re a 60/40 investor (60% stocks, 40% fixed income) for example, you may want to dial down your stock weighting to, say, 50%. To be clear, making a change should not be your first instinct and a decision on any move should be measured and not taken lightly. You were thoughtful when first determining your SAM and should be equally, if not more considerate when making a change. There’s an old axiom that’s especially relevant in times like these — Your portfolio is like a bar of soap; the more you touch it, the smaller it gets. Further, any adjustment should be lasting, rather than an attempt to time the market. If anything, the last 100 days have proven that this doesn’t work. Investors who moved their portfolio to cash during the downturn have done considerable damage.
Another thing to keep in mind: interest rates are insultingly low to savers these days. The fixed income portion of your portfolio is not going to provide stellar returns going forward and will be challenged to even keep pace with inflation. If you want some growth over the medium to long term, you need a decent level of stock exposure.
Yet, you also need to be able to sleep at night. Which is why it’s important to take a good look in the mirror when evaluating your first 100 days. If you need a sounding board or advice, we’re here to help and encourage you to contact us, especially if you’re considering a change in your portfolio.
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