“We have identified five different pandemic indicators that we are continuously monitoring. When we see enough improvement in the aggregate, we will rebalance portfolios. Markets are forward-looking and don’t need to see an all-clear signal; they will recover when investors are confident that the economy will rebound,” Cordaro said.
The “RegentAtlantic Pandemic Scorecard” indicators Cordaro built and is watching for improvement before full-scale rebalancing are:
- Peaking infection levels: Are infection levels showing sings of peaking in the U.S. and Europe?
- Coordinated containment strategies: Are government policies effectively slowing the spread of the virus?
- Effective fiscal stimulus and monetary policy: Are government programs doing enough to protect individuals and businesses from the economic downturn?
- Medical progress: Have effective treatments been found? Has there been progress on a vaccine? Is hospital capacity sufficient?
- Market technical: Has volatility subsided? Are key market players at exposure levels that will limit further downside adjustments? Will institutions rebalance back into equities?
“The economic impact of Covid-19 is much like a hurricane,” Cordaro said. “It is powerful, dangerous and temporary. Once this storm passes, some things may change, but the vast majority of our daily lives will return to normal.”
He said he has avoided going to cash and market timing, which he called dangerous maneuvers in the incredibly volatile markets we’ve seen. “Getting market timing wrong by a day or two can be disastrous. Two of the S&P 500’s 10 largest percentage loss days occurred in March 2020, while two of the 10 largest percentage gain days also occurred in the same month. In fact, it’s common for both large loss and gain days to occur during a financial crisis. Though it is tempting to sell everything when markets are chaotic, it is safer to remain invested according to your long-term plan.
“Once we are past the eye of the Covid-19 storm, we still have some choppy waters to traverse,” he added. “This will require careful monitoring of each asset class and investment. More adjustments will likely be necessary until we steer fully clear of the crisis.”