Happy March from everyone at XYIS!
Here are some highlights of the index returns for February 2020:
- Global equities were down sharply across the board in February; the key driver was obviously the coronavirus, causing disruptions in global supply and demand, as well as creating concern and uncertainty about the future.
- While Emerging Markets was one of the hardest hit benchmarks in January, it was actually the best performer in February, though still fell -5.3%.
- Domestically, large cap growth was down the least (-6.8%) while large cap value and small cap value declined the most (-9.7%).
- Negative returns have started to eke into 1 year and even 3 year return time frames, though in many/most cases this has not happened.
- Global fixed income has acted as we would have expected given the tumultuous equity markets
- 10 year US Treasury yields declined throughout the month from 1.54% at January month end to 1.13% at February month end. 5-10 Year Treasuries rose 2.7% in February while 30 year Treasuries jumped 6.5%
- Many fixed income benchmarks have 1 and 3-year returns that appear more equity-like than fixed income-like. We would suggest these high returns are more of an anomaly and much higher than capital market assumption inputs used for planning purposes.
- High yield, fixed income, which is generally more correlated to equities, was the one fixed income benchmark that fell in February.
- What can/should advisors be doing with clients during difficult market periods? Some of the following measures may be helpful for your clients:
- Be proactive. Reach out to clients, especially the ones that you know are more sensitive to market movements or that may be in industries that are more impacted by the coronavirus.
- Remind them that market movements like we are experiencing will happen from time to time. The planning you have done with them is focused on the long term. Remember, global equities, as represented by the MSCI ACWI, are still up a very strong 7% and 8.1% over the last 3 and 10 years respectively.
- Look for potential rebalancing opportunities.
- Look for potential tax loss harvesting opportunities.
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