In the opening sentence to his book on Asset Management, published in 2014, Professor Andrew Ang said:

“The two most important words in investing are bad times”

We are in bad times. Investing is about taking the risks associated with bad times and being compensated for them. However, to get compensation from the market you must be in the market.

This particular bad time was prompted by a virus, with the later addition of an oil price war. First exposed to the virus were China, South Korea and Japan who, now, after a period of 3-6 weeks have a daily reduction in new cases. The public health response is focused on lessening the immediate impact but stretching the pain over a longer period of time, also known as “flattening the curve”.

The public health response has economic consequences in disrupting economic production and consumption. For those countries first in, there is light at the end of the tunnel but for others, including Canada, there is more pain to come. This is distinct from the 2008 recession when a financial crisis spilled into the real economy and the impact was open ended.

Investment Impact

In calmer times, we established the degree of risk (bad times) you were willing to endure to achieve long term goals.

Questions for you:

Have your long-term financial goals changed?
Has your ability to endure bad times changed due to employment, health or other changes?

If the answer to both questions is “no”, then your long financial goals are intact. You not only do not need to change strategy; it is essential you do not change strategy.

What are we doing?

Play offence not defence: we maintain your allocation to stocks to maintain your long-term return expectations.
For taxable accounts, we take opportunities to defer taxes through tax loss selling.
We check if any withdrawals from the portfolio have to be adjusted to be sustainable.
Your financial plans take into account that bad times will occur. We periodically check your long- term goals are not at risk from short-term bad times.

We will provide regular updates and commentary every week, and we would like to hear from you.

If you want more, here is a 5 minute read from Ray Kerzérho, PWL’s Director of Research and a 30 minute video from our friends at Dimensional Fund Advisors (DFA).