Q1 2020 Update on PIM Portfolios

Preparing for Market Turbulence, Mark Knapp

 

Market ebbs and flows are normal and healthy. Recently, markets had risen so quickly and a pullback may be overdue. This ‘increased volatility’ will likely be the norm for markets over the next year as we head into US presidential elections and the media continues to amplify all the rhetoric that comes with those. We stick to our focus of investing and holding high quality issues for the long-term and pay less attention to the day-to-day noise of markets that tend to become small blips over time.

 

Over the past year, we have become more defensive with our portfolios reducing risk in fixed income by increasing weights to higher quality issuers and limiting higher yield exposure. Our asset allocation targets have been on long-term benchmarks for over a year and are not skewed overweight like many others. For example, for a Balanced Investor our target weight is 55% vs. the 57-58% overweight of others. Last summer, we increased our weighting to the ‘low volatility’ strategy for Canadian equity, which works better for this market. Roughly, our equity allocations are split one-third to Canada, one-third to the US and one-third to International/Emerging Market equities with a bit of a skew towards US markets. All of the Funds and ETFs in our models are screened on several parameters including performance, risk and price and this gets reviewed quarterly. Our stock models are defensive and focused almost entirely on large cap dividend paying companies with a couple exceptions (i.e. Amazon, or Warren Buffet’s company Berkshire Hathaway). These models have also moved more defensive over the past several quarters and include a small weighting to gold exposure.

 

As always we stick to our discipline, align our asset allocation, and look for opportunities while being nimble.

 

Great notes & Reminder there is Always Something

 

- there have been 26 market corrections only since WWII (avg down is around 14%), opportunity is rare!

- recoveries take on avg 4 months (longest was 24 mos), not too bad

 

1934 Depression

1935 Spanish Civil War

1936 Economy still struggling

1937 Recession

1938 War clouds gather

1939 War in Europe

1940 France falls

1941 Pearl Harbour

1942 Wartime price controls

1943 Industry mobilizes

1944 Consumer goods shortage

1945 Post-War recession predicted

1946 Dow Tops 200 - market too high

1947 Cold War begins

1948 Berlin blockade

1949 Russia explodes A-bomb

1950 Korean War

1951 Excess profits tax

1952 US seizes steel mill

1953 Russia explodes H-bomb

1954 Dow Tops 300 - market too high

1955 Eisenhower illness

1956 Suez Crisis

1957 Russia launches Sputnik

1958 Recession

1959 Castro seizes power in Cuba

1960 Russia downs U-2 plane

1961 Berlin wall erected

1962 Cuban Missile Crisis

1963 Kennedy assassinated

1964 Gulf of Tonkin

1965 Civil Rights marches

1966 Vietnam War escalates

1967 Newark race riots

1968 USS Pueblo seized

1969 Money tightens - market falls

1970 Cambodia invaded - Vietnam War

1971 Wage price freeze

1972 Largest US trade deficit ever

1973 Energy crisis

1974 Steepest market drop in 4 decades

1975 Clouded economic prospects

1976 Economic recovery slows

1977 Market slumps

1978 Interest rates rise

1979 Oil prices skyrocket

1980 Interest rates at all-time high

1981 Steep recession begins

1982 Worst recession in 40 Years

1983 Market hits new high

1984 Record-setting market decline

1985 Economic growth slows

1986 Dow nears 2000

1987 Record-setting market decline

1988 Election year

1989 October “Mini-crash”

1990 Persian Gulf Crisis

1991 Communism tumbles with Berlin Wall

1992 Global recession

1993 Health care reform

1994 Fed raises interest rates 6 times

1995 Dow tops 5000

1996 Dow Tops 6000 I Election year

1997 Asian markets in turmoil

1998 World market correction

1999 Dow tops 11000 I Fear of Y2K

2000 Dotcom bubble bursts

2001 September 11th terror attack

2002 Markets drop to 1997 levels

2003 Iraq War

2004 Indian Ocean tsunami

2005 London terror attacks

2006 Russia-Ukraine tensions

2007 Housing crisis

2008 Financial crisis

2009 Global recession

2010 European sovereign debt crisis

2011 U.S. credit downgrade

2012 Global tensions with Iran

2013 The “Taper Tantrum”

2014 Oil prices fall 50%

2015 First U.S. rate hike in 10 years

2016 U.K. votes for Brexit

2017 Rising interest rates

2018 Slowing global growth

2019 U.S.-China trade war/tariffs

2020 Coronavirus outbreak (COVID-19)

 

Knapp Wealth Management

Wealth Advisors, Financial Planners, and Investment Managers