As we slowly peek our heads out our front doors for signs of normality, we reenter a changed world full of uncertainty. By now, your clients have looked to you for guidance, reassurance and leadership in navigating the economic instability of Covid-19. As you speak with your clients, keep in mind Beacon is here as a resource for you as we are all finding our way in the new normal.
In our recent Advisor Symposium, Josh Hirt, CFA, economist in the investment strategy group at Vanguard, gave an overview of the markets and the economy and the direction both are heading in post-Coronavirus. While second-quarter numbers will be dire, a slow, but steady recovery reaching into 2021 and 2022 is expected, with growth contingent on confidence in health care and containment measures.
As far as individual sectors are concerned, commercial real estate and air travel are expected to be the hardest hit. Because of a work-at-home shift, commercial real estate is also anticipated to be slow to recover. Because of fears of traveling, the airline industry and accommodations may not realistically recover until 2021. It’s important to remind your clients of Beacon’s equally-weighted sector diversification, which can help mitigate severe losses in any particular sector.
Pivoting to fixed income strategies, the Fed has signaled that rates will stay at its historic lows into 2022. The Fed’s response has certainly helped as a tailwind for the market. Fixed income yields will be subdued for the foreseeable future, but fixed income can still provide stability and diversification when used in a holistic portfolio strategy, something to stress with your clients.
The market has historically been forward-looking, and Hirt shared expectations of the economy catching up to the market’s swift recovery by the third or fourth quarter.
So, what about your clients?
It’s important to share these market thoughts with your clients, but also to reiterate Beacon’s fundamental, research and data-driven philosophy: Our stop-loss strategy is designed to provide downside protection in historic and unsteady markets just like this. Chris Cook and Dan Baccarini laid out some conversation starters for you to help ease clients’ minds:
The S&P 500 is one of the major indices that clients look to as a bellwether of what’s happening in the markets, but as you may well know, the S&P is not as indicative of the market as clients might think. More than 20% of the S&P is comprised of 5 of the largest tech stocks. Would your clients still look to the S&P 500 if they knew that? Especially for clients at and near retirement, an index like the S&P 500 is not an accurate benchmark for the performance of their portfolio. It’s up to you to moderate your clients’ expectations with conversations about your process, as well as debunking some incorrect assumptions.
Know your client & yourself
Be proactive and get in front of any questions and concerns your clients may have. Know what your clients are thinking before they even do. Does your client need liquidity to help their children or grandchildren weather Covid-19? How does a 10, 20 or 30% positive or negative turn in the market affect them? Do they understand the methodology behind your strategy? It’s important to understand and be understood. An educated client is an active participant in their strategy, and the more you understand your client’s needs, the easier it will be to find your way in the new normal.
For more information about Beacon portfolios or the many educational resources we have available for you and your clients, contact your wholesaler today!