Yesterday’s up market provided an opportunity to raise additional cash across all of our firm’s risk-managed and hybrid portfolios. Defensive assets (money-market assets and short-term bonds) are now at extreme levels across these strategies and will significantly limit (but not entirely eliminate) market participation.

World markets have failed to stabilize in response to global Corona virus containment efforts. Central banks across the globe have slashed interest rates in an effort to provide liquidity; however, because interest rates are already at historic lows, because ill-timed tax cuts have already been deployed, and because debt levels are already at record highs, these efforts by the Fed and other central banks are likely to have limited effect.

Readers of our posts know that we’ve been proactively reducing market exposure over the past two weeks, but have not been entirely immune from market weakness; however, we have taken steps to limit future losses in response to a dynamic environment. Global economic conditions have quickly deteriorated and the market is continuing to reprice assets in this changing landscape. For individual investors, our adjustments have been consistent with our risk-managed and hybrid strategy goals. For company-sponsored 401(k) plans that have deployed our suite of flexible strategies, their fiduciary requirements under ERISA have also been addressed.

For non-profit endowments, however, the landscape may be far less encouraging. Many non-profits continue to employ static strategies and investment policy statements that have little inherent flexibility, and regrettably may be experiencing excessive portfolio drawdowns at a most inopportune time – the time in the economic cycle when endowment assets are most needed. And while solutions for non-profits to address these risks have been available, the speed at which many have been deployed has been glacial. We feel that this situation is unfortunate, but remain hopeful that flexible strategies (and a new breed of advisors like Appleton Group Charitable) will have opportunities to displace less flexible strategies in the future.

We will continue to adjust our invested positions as necessary given this new market and economic landscape. As always, our door is open to you (our clients, friends, partners, and future clients).