Enjoy this guest post by Chadd Mason, CEO at The Cabana Group, one of our investment partners here at AMG, Inc.
Stock markets around the world are trying to stabilize after the historic drop we have seen this month.
Swings of 4% a day have been the rule for more than three weeks now. The S&P 500 enters the last day of March down 19% for the year and down 12.5% for the month. This makes the first quarter of 2020 the worst quarter for U.S. equities since 1987. As bad as this sounds, we have rebounded more than 15% since the closing low seen on March 23. These facts alone evidence the extreme volatility we are experiencing. The panic selling appears to have abated for the time being. For markets to continue to recover, we either need to see a medical solution to the coronavirus, or a plausible timeline to the quarantine. If the current situation lasts months rather than weeks, the economic damage will be profound and is likely to result in much lower stock prices. The number of unemployment claims filed last week is beyond anything ever seen. This week’s number is likely to be even larger. The loss of earnings and output by our working population is incredible. The consumer makes up 70% of our economy. If 20% of those consumers are without a job for a sustained period, we are in for a world of hurt. I read over the weekend that 1 in 3 families have lost a job due to the coronavirus, and according to many, we are at only at the very beginning of the rise in cases here in the U.S. Scary stuff indeed.
Now for some good news. Last week we discussed the incredible resilience of our country and our fellow citizens.
Don’t ever bet against American ingenuity. We are seeing some of that begin to take shape right now. Wartime powers are being implemented to convert our biggest industries into manufacturers of critical medical supplies. Our largest pharmaceutical companies are devoting all available resources to developing not only a vaccine, but also a treatment. Our healthcare workers are showing incredible devotion and courage - literally putting their lives on the line for the rest of us. The fortunate are donating to the less fortunate. Helping hands are being extended all around us (I apologize for the untimely metaphor). Our country is beginning to come together.
At the end of the day, I believe we are going to need help from science to stop the ongoing loss of life and associated economic destruction. How long that takes will determine the economic damage to our country. We will ultimately come out stronger, with renewed appreciation for our families, our freedom and our health. At Cabana, we will work to defend and protect our clients’ assets during what can only be described as the most difficult of times.
This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.
This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.
Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at www.adviserinfo.sec.gov/.
The Financial Advisor Magazine 2018 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana's future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor magazine. RIAs were ranked based on percentage growth in year-end 2017 AUM over year-end 2016 AUM with a minimum AUM of $250 million, assets per client, and growth in percentage assets per client. Visit www.fa-mag.com for more information regarding the ranking.
The Financial Advisor Magazine 2019 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor Magazine. Working with a highly-rated advisor also does not ensure that a client or prospective client will experience a higher level of performance. These ratings should not be viewed as an endorsement of the advisor by any client and do not represent any specific client’s evaluation. RIAs were based on number of clients in 2018, percentage growth in total percentage assets under management from year end 2017 to 2018, and growth in percentage growth in assets per client during the same time period. Visit www.fa-mag.com for more information regarding the ranking.
No client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for any investor. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. While loss tolerance and targeted "drawdown" are identified on the front end for each portfolio, Cabana's algorithm does not take any one client's situation into account. It is the responsibility of the advisor to determine what is suitable for the client. An advisor should not simply rely on the name of any portfolio to determine what is suitable. Cabana manages assets on multiple custodial platforms. Performance results for specific investors may vary based upon differences in associated costs and asset availability.
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