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Bill Richardson’s March 9 2020 Note to Clients

Hello everyone. Hope all is well. Today we are waking up to several historic events in the markets:

  • Oil prices down over 22% from Friday (great for filling up at the pumps but not so good in the short run for the markets)
  • US stock market futures down over 5%
  • CND dollar is down 1.1% (at time of writing)
  • 10-year US government bond yields declined to 0.39% (lowest level ever).

Why?

There are obviously many overlapping reasons (including Coronavirus) but with regards to the price of oil, Saudi Arabia and Russia could not come to an agreement over the weekend on production cuts (due to oversupply) so instead Saudi has increased production and cut oil prices for April.  Ideally an agreement is reached between the major producers and we see a reversal of energy prices. Fortunately, we have limit to no exposure in energy but this development still has a ripple effect on the rest of the markets (TSX down close to 7% and S&P500 down 5% at time of writing).

 

SUGGESTIONS

 

  • Don’t overreact. Fear is driving most of the recent moves and at some point, that fear will subside and markets will rebound swiftly. As Warren Buffett says “Be fearful when others are greedy and greedy when others are fearful”.
  • Keep in mind, 2019 had one of the best 1stquarters in history following the significant decline we had in the 4th quarter of 2018.
  • Money needed soon (1-3 years) should be invested more conservatively.  
  • REMEMBER YOUR LONG-TERM PLANS (5+ years)
  • BUYING OPPORTUNITIES will be created by this ‘FEAR’…be ready. Many great companies are on sale right now.
  • Continue to diversify across ALL ASSET CLASSES (public equity, public bonds, private equity, real estate, private debt, cash, etc.)

 

All the best,

Bill