March 2020 Capital Markets Update

Dear Clients, Friends and Associates,
Over the last several months, society has been confronted with a global health crisis seemingly pulled from a science fiction novel. Despite this, we are confident that our combined strength and resilience will meet and overcome the immediate challenge and better prepare us for future crises.
Our investment and planning approaches seek to blunt the effects of severe dislocation regardless of the catalyst and take advantage of oversold markets that often accompany a crisis. We share your emotional tumult but employ investment risk/reward guidelines, which we believe will limit overreacting as the equity markets tests statistical limits.
We believe that now is not the time to sit idly, but to take calculated action and add value. We are continually updating our analytics regarding asset allocation and risk assessment. Rebalancing, opportunistic tax-loss swaps, and other forms of ongoing portfolio management are essential.
Recently, it appears that capital markets have begun a stabilization process characterized by more orderly price discovery. Several indicators and actions are supporting the capital markets:
  • Historical extremes in the fear gauge as measured by the VIX (volatility measure) which has led to panic selling;
  • The panic selling caused a near-term liquidity crunch resulting in oversold safer havens such as municipal bonds and high-quality corporates – repriced high-quality municipals are providing gross returns in excess of Treasuries;
  • Swift and bold action on the part of the Federal Reserve and the Treasury to restore liquidity and ensure orderly functioning of markets;
  • By weeks end we anticipate the enactment of legislation providing broad fiscal stimulus that should greatly aid individuals and corporations to bridge the economic stress affecting virtually everyone;
  • To the extent possible, emergency response systems are ramping up additional capacity to hopefully meet demand for treatment;
  • Certain Asian economies are returning to work, providing useful data relating to the time required to control and recover from widespread exposure. We are not dismissing the chance of a global relapse, but are hopeful that countries initially affected will act strongly to stave off a second wave of infection;
  • During this week, long-term investors are finding significant pricing value from the end of February;
  • Liquidity levels in fixed income markets have stabilized and as noted before provide strong relative value in certain sectors.

We seek to rebalance portfolios back to target equity weights, with emphasis on sectors such as Technology, Healthcare, and Communications, which we believe will provide resiliency through the crisis and also offer long-term value. This secular thematic approach will drive growth as the economy recovers.

The global decline in equity markets (approximately 30%), presents a relatively uncommon opportunity to selectively add risk.
We are mindful that the markets do not alert investors by ringing an “all clear” bell at the bottom of a cycle. Although greater than normal volatility is expected near term, we feel strongly the risk premiums have reached levels that long term, disciplined investors will be very happily rewarded.
Please do not hesitate to contact us at any time with questions and specific issues.
With a deep sense of responsibility,

From your 5C Advisory Team.

The outbreak and the market sell-off

Clearly the world is closely following the trajectory of the coronavirus outbreak.  Uncertainty is global and as citizens we are unsettled, which is manifesting itself in the investment markets.

Fundamentally, markets dislike uncertainty, processing information in real-time whether positive or negative, leading to increased volatility.  When markets move rapidly downward, our experience shows us that the associated stress tends to be greater than the positive feelings one generally experiences during a rising market.  Our client portfolios are designed to moderate the risk associated with current events, provide liquidity and position you to be opportunistic.

Market declines can occur when investors are forced to reassess expectations for the future.  The outbreak’s expansion is causing worry amongst governments, corporations and individuals about the near and longer term impact on the global economy.  Apple announced earlier this month that it expected revenue to take a hit from problems making and selling products in China1.  Australia’s prime minister has said the virus will likely become a global pandemic2, and other officials there warned of a serious blow to the country’s economy3.  Airlines are preparing for the toll it will take on travel4.  These are just a few examples of how the impact of the coronavirus is being assessed.

The market is responding to new information in real time and is attempting to price in unknown factors.  As risk increases during a time of heightened uncertainty, so do the returns investors demand for bearing that risk, which initially pushes prices lower.  When approaching the market from a long-term, unemotional, and disciplined perspective this relationship between risk and reward is core to our investment philosophy.  This helps us to make prudent investment decisions for our clients no matter the circumstances.

We can’t state with confidence when this crisis will moderate and hopefully end.  However, our expectation is that those bearing today’s risk will be compensated with positive expected returns.  We need only reference lessons learned from past health crises, such as the Ebola and swine-flu outbreaks earlier this century, and of market disruptions, such as the global financial crisis of 2008–2009.  Further, history has shown no reliable way to identify a market peak or bottom, supporting our belief against making market moves based on fear or speculation, even as difficult and traumatic events transpire.

Amid the anxiety that accompanies developments surrounding the coronavirus, decades of financial science and long-term investing principles remain a strong guide.  If you have specific portfolio questions, liquidity or changing financial needs please call us to discuss.

From your 5C Advisory Team.

View Our November 2019 Market Review

This report features world capital market performance and a timeline of events for the past 4 months.

The report also illustrates the impact of globally diversified portfolios and features timely topics.

View Our Third Quarter 2019 Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Announcement from 5C Capital Management this August 2019

We are pleased to announce that

Martin O. Teevan

has joined our firm as

Vice President, Private Client Services.

Marty brings over 30 years of financial services experience and
will be responsible for our West Coast business development and client services.
He can be reached at (917) 583-3298 or mteevan@5cwealth.com
Michael R. Sanders, Principal
Craig R. Marson, Principal

View Our May 2019 Market Review

This report features world capital market performance and a timeline of events for the past 4 months.

The report also illustrates the impact of globally diversified portfolios and features timely topics.

View Our Report on The ABC of Education Investing

With school back in session in most of the country, many parents are likely thinking about how best to prepare for their children’s future college expenses. Now is a good time to sharpen one’s pencil for a few important lessons before heading back into the investing classroom to tackle the issue.

 

View Our Third Quarter 2018 Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

View Our Second Quarter 2018 Market Review

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Read our Capital Market Review

As we complete our first full year as 5C Capital Management, LLC, we are thankful for the trust and confidence our clients and strategic partners have placed in us.
We work hard to keep all of our clients informed about important financial topics. To this end, please see attached our January 2018 communication, we hope you enjoy reading it as much as we enjoy sharing it.