Home WBI Intelligence As Corona Virus Fears Shake Markets, WBI Strategies Move to Cash

As Corona Virus Fears Shake Markets, WBI Strategies Move to Cash

by Don Schreiber, Jr.

“It’s not so much a question of if this will happen, but rather more a question of exactly when …”

Panic, it seems, spreads faster than pandemics. The global spread of the coronavirus and an ominous warning by both the Centers for Disease Control and Prevention and the U.S. Food and Drug Administration that Americans should prepare for the possibility that the virus could disrupt their daily lives has rattled U.S. and international markets over the past several days.

The February 24 and 25 two-day coronavirus-fueled selloff, which has wiped out $1.7 trillion of shareholder wealth and has erased 6.3% percent of the S&P 500’s value, was the index’s sharpest two-day slide since August 2015.

When the COVID-19 coronavirus outbreak forced the closure of a number of factories in China, speculation grew about the effects of a potential disruption in the so-called “supply chain” and its impact on U.S. manufacturers that rely on Chinese suppliers for parts. Microsoft has since warned the coronavirus outbreak would impact the supply chain for its personal computing unit which accounts for about one-third of its revenue. Other tech giants, including Apple and HP, have already warned about supply-chain disruptions. Will the coronavirus significantly weaken a global economy that is already in a deceleration phase? Will we see a global recession as a result? Will central banks in developed markets respond with further stimulus in an effort to soften the economic consequence? 

WBI Response to Market Drop

While no one can say for certain what the ultimate outcome will be, WBI strategies have been battle-tested in the past, both through the 2000-2002 Dot-Com bubble and the 2008 Financial Crisis. During each of these tumultuous periods in U.S. market history, WBI utilized a process which sought to mitigate the risk to being invested by holding significant defensive cash positions – and to the extent possible, limit volatility and preserve capital.

Similarly, in this current decline, WBI has substantially increased the amount of cash in each of our portfolios as of February 28, 2020. Just as important is our firm’s buy discipline which should enable the accounts to be reinvested quickly once market momentum reverses.

The challenges and consequences of dealing with declining stock prices are not new. While we all know instinctively that the markets have risk, the psychological shift between accepting and embracing risk, and then detesting it, can sometimes result in violent price swings. Abandoning well-conceived, long-term investment strategies – and sometimes common sense – can do irreparable harm to one’s financial situation. We believe the best course of action is to face what lies ahead with a steadfast commitment to your investment plan, and instead of reacting to the urges of fear, to maintain a patient, long-term orientation to the future.

Important Information

Allocations are subject to change.

Past performance does not guarantee future results. This is not an offer to buy or sell any security. No security or strategy, including those referred to directly or indirectly, is suitable for all accounts or profitable all of the time and there is always the possibility of loss. You should not assume that any discussion or information provided here serves as a substitute for personalized investment advice from WBI or any other investment professional. If you have questions regarding the applicability of specific issues discussed to your individual situation, please consult with WBI or your chosen professional advisor. This information is compiled from sources believed to be reliable, accuracy cannot be guaranteed. Information contained in this Presentation may constitute “forward-looking statements,” identified by terminology such as “should,” “expect,” or “continue,” or the negatives thereof or other variations thereon. Due to various risks and uncertainties, actual events, results [or the actual performance of the Adviser’s investments] may differ materially from those reflected or contemplated in such forward-looking statements. WBI’s advisory operations, services, and fees are in the Form ADV, available upon request.

All investing involves risk, including loss of principal. While WBI seeks to manage and monitor risk, there is no way to remove risk. There is no guarantee objectives will be achieved.

You are not permitted to publish, transmit, or otherwise reproduce this information, in whole or in part, in any format to any third party without the express written consent of WBI Investments, Inc.

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