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Do You Have A Long-Term Plan If The Coronavirus Bear Market Continues?
Do You Have A Long-Term Plan If The Coronavirus Bear Market Continues?
2020 has been a wild ride in the stock market. After setting an all-time high on February 19, the market slid a stunning 34% by March 23 – a space of barely 5 weeks.
Then it did something probably nobody at the time saw coming – it took an equally dramatic turn upward. Through April 30 the market recovered 32% from its March lows, as measured by the S&P 500.
Pretty much stay the course on my existing long-term portfolios and invest new money as opportunities present themselves for either long-term positions or as near-term trades, as I did in Feb-May this year.
I don't agree with Hooper that the coronavirus risk is neutralized by QE's by the Fed. The current 14.7% unemployment number could go even higher even as lockdown eases across the country. Mails are open and there are few customers as many fear to venture out.
Just wondering what your overall asset allocation might be? Cash 10% ... Fixed (income) ? ... Equity (stocks) ?
I have been retired now for more than five years. My basic asset allocation is 20/40/40 which I can overweight the income area and equity area by 5% each should I feel warranted. Currently, I'm at 15% cash, 40% income and 45% equity. Since, the yield on cash is in the 1% range (or less) I'm thinking of raising my income allocation to 45% and reducing cash to 10% as my CD's mature. The last CD I had mature, a week or so ago, I rolled into three good generating income funds with a package yield of a little better than 4%. The three fund package consisted of BLADX, FLAAX & PFANX.
Here is more on how I roll now in retirement.
Old_Skeet's All Weather Asset Allocation.
My all weather asset allocation of 20% cash, 40% income and 40% equity affords me everything necessary to meet my needs now being in the distribution phase of investing. The benefit of this asset allocation is that it provides sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns.
The 20% held in cash area provides me ample cash should I need a cash draw over and above what my portfolio generates plus it can provide the capital necessary to fund a special investment position (spiff) should I choose to open one during a stock market pullback. In addition, cash helps stabilize a portfolio during stock market volatility. Example of investments held in this area are cash, money market mutual funds and CD's.
The 40% held in the income area provides me ample income generation to meet my income needs in retirement. It is a well diversified area that incorporates a good number of income generating type funds. Some examples of investments held in this area are BAICX, FLAAX & PONAX.
The 40% held in the equity area provides me some dividend income along with some growth, that equities generally provide, that offsets the effects of inflation, over time. Some examples of investments held in this area are IDIVX, NEWFX & SPECX
Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way, principal grows over time. And, as principal grows the amount available for distribution does as well.
I morphed into a plan over the years though I admit every time it's tested, like in March, I still get nervous.
The plan, the plan...
- 1/2 my retirement savings is in the Schwab Intelligent Portfolio at about an equity:bond:cash allocation of 45:35:10. I can't screw it up, which is good - over the past year I set up a 3 year expense withdrawal bucket in anticipation of cutting back to part time semi-retiring or retiring altogether. I wanted the option. - The remainder of the savings is my self managed account which went into March at about 56:25:12 and about 7% gold. I'm most disappointed in the bond portion of this where I held IOFAX, MAINX and HY munis. That plan changed. I sold IOFAX and MAINX and the new plan is to be very lean in bond funds going forward. For some reason I can accept an equity fund dropping 25% but I just can't accept a bond fund dropping 20+. I've actually put a lot of the bond sale proceeds into an alternative fund MNWAX. - I'm 66 and trying to hold off SS as long as I can.
I went to all cash before the crash when I was up several %. Then, for about 5 weeks I traded successfully several times stocks and CEFs and then was back to be invested at 99+% in bond OEFs. I find myself trading my bond more than usual because the market changes directions more often. In the last several weeks the market in calmer and going up.
I'm less concerned about a bear market than about having maybe missed my chance to deploy my dry powder. When I decide to stop waiting and pull the trigger, I'll let you all know -- it'll be a sign that we've hit the top.
Jason Furman, Obama's former top economist, says the early data is showing a V-shaped recovery, though of course that would change if we have a second wave. On his Twitter feed, he also notes that federal stimulus so far has been equal to 30% of GDP.
- Oversimplification to call it the “Coronavirus Bear Market.” Top-heavy markets are always prone to sudden sharp downdrafts. The virus and related impacts provided the ignition source. But IMHO there was a lot of dry timber waiting to be ignited.
- No specific plan for how to handle sharp corrections. Depends on severity, length of time, particular sectors affected. What I try to do is play it by ear at the time and make slow gradual incremental moves out of my less aggressive funds (like RPGAX) and into my more aggressive ones (like DODBX). I reported one such move here in early March. Since we all have varying allocation models, time frames, risk tolerances and investments, that might not be the answer for anyone else.
- Many will make a case for “doing nothing.” And it’s a convincing argument. So if that’s what floats your boat / paddles your canoe, go with it.
- @JohnN - May I suggest calling it “The Trump Bear Market”?
- @JohnN - May I suggest calling it “The Trump Bear Market”?
How convenient to blame Trump. I don't remember you cheered Trump with the lowest unemployment in decades (the usual TDS)...but don't worry, you will get him for 4 more years.
@FD1000 - But you misunderstand. I’m not attaching “blame”. He just happened to be the guy standing watch when the ship began sinking. I still think it a convenient label.
Addendum: Attaching blame is difficult. Like I said, the virus provided the ignition. But investor buying habits, computer driven algorithms, debt, greed, fear, trade tensions and more played a part. Surely, you did not miss the NYT article posted here a day or two before the downturn began that “Mom and Pop investor” had returned to the markets “big time”. What a coincidence.
Maybe somebody else has time to dig that one up. A classic.
@Old_skeet - thanks for commenting on my plan. At present I am fully invested in following funds - AKREX, BAFWX, PARMX, PSGAX, TGUNX, AUENX, DSEEX, VMNVX, USMV BHBFX, SCHD, VWIAX and some PIMCO CEFs. I plan to raise cash because the sudden downfall whenever it happens and possibility of age biased layoff and I will need cash immediately to live on.
@FD1000 - But you misunderstand. I’m not attaching “blame”. He just happened to be the guy standing watch when the ship began sinking. I still think it a convenient label.
Addendum: Attaching blame is difficult. Like I said, the virus provided the ignition. But investor buying habits, computer driven algorithms, debt, greed, fear, trade tensions and more played a part. Surely, you did not miss the NYT article posted here a day or two before the downturn began that “Mom and Pop investor” had returned to the markets “big time”. What a coincidence.
Maybe somebody else has time to dig that one up. A classic.
Mom and Pop is one of my favorite threads online since I was on Compuserve.
Presidents always get the credit, or blame, for the markets. Adherents skew it one way, deranged opponents another. It's more predictable than the weather. Not quite as predictable as the tides.
As far as plans go . . . If the rally continues I'll rebalance my IRA to about 45-45-10. If things get crazy good . . . I might look at harvesting some tax losses and reallocating some sector investments in my taxable account. The recent changes to the tax code may have altered some of my assumptions. But I need to break out the arm garters and green eye-shade first.
I think a second significant peak is inevitable and this equity bounce will crash. The behavior of people last weekend is clear evidence that most covididiots will get infected and soon. There are already rising case and hospitalization rates in many states, mostly in the south and midwest where people seem deluded by Drump.
If Missouri is lucky and escaped the massive infections NYC suffered because they did not commute by subway, the people in Lake of the Ozarks just took a long NYC subway ride without protection. What do they think will happen? A church in Germany just had dozens of cases despite social distancing.
AS the second wave hits, it will be at least a year and probably two before people are comfortable going back out in force, and consequently at least two and maybe longer before our consumer driven economy is back to where it was in 2019, and I suspect at least 20% of those businesses will not return.
If we had massive testing and aggressive robust contact tracing we might cut isolated outbreaks off quickly but when many governors and a large number of people do not believe this is real I don't see this happening. The politicians in Georgia Florida and Texas are already trying to cover up the true case numbers and death rates
Consequently, I would not have any money in stocks that you need for the next five years. There will be buying opportunities along the way.
My cash allocation is 50% conservative bond funds 30% and equity 20% I am buying small positions in what seem to be safe dividend equities with some long shots in energy.
None of this adds in what will happen to evictions and the mortgage industry. Airlines are working hard to come up with ways to demonstrate you can fly a full plane without covid but why will people believe them. No one I know wants to stay in a hotel
I don't think most people comprehend what we are up against.
1) How bad Covid can get. All these statements about "it only affects old people" ignore the fact that for example, here in CT the urban and suburban hospitals have been decimated. Not that there are refrigerated trucks like in NYC but the hospitals are almost completely full of Covid. 50% of the ICU beds are under 65. The only reason Yale New Haven Hospital was not overwhelmed was the social distancing and canceling of almost all other patient care. They are only now after three months tentatively restarting some elective surgeries, but only major ones.
Why won't Covid do to the poorer neighborhoods of San Antonio and Austin what it did here for example, if people don't take extreme precautions? And when it hits, most of the folks i these southern states have far higher risk factors for critical disease (especially obesity) than the NE, and they do not have insurance.
2) the pathetic federal response and the inhumane lack of leadership and even basic human decency from our commander in chief has forced states to do it on their own, perhaps permanently impairing the testing and contact tracing that other countries have used to open up somewhat safely. When the second wave hits, states with governors who lean to the "this is a hoax" ( ie Texas Georgia Florida Alabama) will have no position to reverse course without admitting they made a horrible mistake.
Until there is an effective vaccine that has been administered to 50% of the population I fear we are in for a rough ride
@sma3, @Mark I'm certainly inclined to agree (and I'm betting that way, my cash level is much higher than I'd like it to be) but at least two pretty brilliant center left economists (Paul Krugman in Bloomberg, Jason Furman in Politico) think a V shaped recovery is very possible.
I don't think most people comprehend what we are up against.
1) How bad Covid can get. All these statements about "it only affects old people" ignore the fact that for example, here in CT the urban and suburban hospitals have been decimated. Not that there are refrigerated trucks like in NYC but the hospitals are almost completely full of Covid. 50% of the ICU beds are under 65. The only reason Yale New Haven Hospital was not overwhelmed was the social distancing and canceling of almost all other patient care. They are only now after three months tentatively restarting some elective surgeries, but only major ones.
Why won't Covid do to the poorer neighborhoods of San Antonio and Austin what it did here for example, if people don't take extreme precautions? And when it hits, most of the folks i these southern states have far higher risk factors for critical disease (especially obesity) than the NE, and they do not have insurance.
2) the pathetic federal response and the inhumane lack of leadership and even basic human decency from our commander in chief has forced states to do it on their own, perhaps permanently impairing the testing and contact tracing that other countries have used to open up somewhat safely. When the second wave hits, states with governors who lean to the "this is a hoax" ( ie Texas Georgia Florida Alabama) will have no position to reverse course without admitting they made a horrible mistake.
Until there is an effective vaccine that has been administered to 50% of the population I fear we are in for a rough ride
I doubt I'll get a vaccine shot. Big Pharma to the rescue? No thanks. I also find it disturbing people's dependency on drugs.
As for Covid, I let go of all the fear a while ago and never felt better. Fear is very unhealthy. Just be smart. If people washed their hands more, we'd have a lot less sick people overall.
@Starchild - I'd be first in line for that vaccine. Obnoxious me also thinks that your lack of concern for your fellow citizens is beyond obnoxious. Big brother is not the problem here, simple minds are. This disease is not a game or is 100K not a high enough death toll for you.
You did not answer the questions. But I will: For sure. And gladly.
Also, you're telling me not to get obnoxious when you doubt you'll get vaccinated? Go look up 'noxious'. You will be, literally, harmful.
Let's diplomatically let this go Mark and Dave, etc. We have different views on this, which is fair, and I'd rather discuss mutual funds here (and for the record, I don't have the virus, so don't worry about me, or being in contact with me if we cross paths at a Walmart).
I find it fascinating that some people refuse to consider vaccines because they are made by "big pharma" but probably do at least one of the following: buy groceries sold by "big agg" eat steak from "big beef" fly on airplanes run by "big airlines" drive cars made by "big auto" etc etc.
If these latter four industries were regulated as heavily as "big pharma"is we would not be in some of the do do we currently struggle with. IT seems most of the objections to big pharma seem to be about their price gouging which is awful. But having the government in your pocket ( Medicare D prohibited from demanding price cuts by legislation for example) and being able to charge outrageous prices is not the same thing as putting out unsafe scientifically suspect products.
I find it fascinating that some people refuse to consider vaccines because they are made by "big pharma" but probably do at least one of the following: buy groceries sold by "big agg" eat steak from "big beef" fly on airplanes run by "big airlines" drive cars made by "big auto" etc etc.
If these latter four industries were regulated as heavily as "big pharma"is we would not be in some of the do do we currently struggle with. IT seems most of the objections to big pharma seem to be about their price gouging which is awful. But having the government in your pocket ( Medicare D prohibited from demanding price cuts by legislation for example) and being able to charge outrageous prices is not the same thing as putting out unsafe scientifically suspect products.
Just let it go sma, dave moran. If you wanna be the first for a potentially, properly untested vaccine, be my guest. That's your view and I'm not gonna stand in your way, but it ain't gonna be me. Their race is for the billions they can get, imo, not for some humanitarian pursuits. Who we kidding? Been there, done that.
Comments
Pretty much stay the course on my existing long-term portfolios and invest new money as opportunities present themselves for either long-term positions or as near-term trades, as I did in Feb-May this year.
https://cnbc.com/video/2020/05/22/us-china-trade-tensions-are-a-bigger-risk-than-coronavirus-invesco.html
I don't agree with Hooper that the coronavirus risk is neutralized by QE's by the Fed. The current 14.7% unemployment number could go even higher even as lockdown eases across the country. Mails are open and there are few customers as many fear to venture out.
Just wondering what your overall asset allocation might be? Cash 10% ... Fixed (income) ? ... Equity (stocks) ?
I have been retired now for more than five years. My basic asset allocation is 20/40/40 which I can overweight the income area and equity area by 5% each should I feel warranted. Currently, I'm at 15% cash, 40% income and 45% equity. Since, the yield on cash is in the 1% range (or less) I'm thinking of raising my income allocation to 45% and reducing cash to 10% as my CD's mature. The last CD I had mature, a week or so ago, I rolled into three good generating income funds with a package yield of a little better than 4%. The three fund package consisted of BLADX, FLAAX & PFANX.
Here is more on how I roll now in retirement.
Old_Skeet's All Weather Asset Allocation.
My all weather asset allocation of 20% cash, 40% income and 40% equity affords me everything necessary to meet my needs now being in the distribution phase of investing. The benefit of this asset allocation is that it provides sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns.
The 20% held in cash area provides me ample cash should I need a cash draw over and above what my portfolio generates plus it can provide the capital necessary to fund a special investment position (spiff) should I choose to open one during a stock market pullback. In addition, cash helps stabilize a portfolio during stock market volatility. Example of investments held in this area are cash, money market mutual funds and CD's.
The 40% held in the income area provides me ample income generation to meet my income needs in retirement. It is a well diversified area that incorporates a good number of income generating type funds. Some examples of investments held in this area are BAICX, FLAAX & PONAX.
The 40% held in the equity area provides me some dividend income along with some growth, that equities generally provide, that offsets the effects of inflation, over time. Some examples of investments held in this area are IDIVX, NEWFX & SPECX
Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way, principal grows over time. And, as principal grows the amount available for distribution does as well.
The plan, the plan...
- 1/2 my retirement savings is in the Schwab Intelligent Portfolio at about an equity:bond:cash allocation of 45:35:10. I can't screw it up, which is good
- over the past year I set up a 3 year expense withdrawal bucket in anticipation of cutting back to part time semi-retiring or retiring altogether. I wanted the option.
- The remainder of the savings is my self managed account which went into March at about 56:25:12 and about 7% gold. I'm most disappointed in the bond portion of this where I held IOFAX, MAINX and HY munis. That plan changed. I sold IOFAX and MAINX and the new plan is to be very lean in bond funds going forward. For some reason I can accept an equity fund dropping 25% but I just can't accept a bond fund dropping 20+. I've actually put a lot of the bond sale proceeds into an alternative fund MNWAX.
- I'm 66 and trying to hold off SS as long as I can.
Jason Furman, Obama's former top economist, says the early data is showing a V-shaped recovery, though of course that would change if we have a second wave. On his Twitter feed, he also notes that federal stimulus so far has been equal to 30% of GDP.
- No specific plan for how to handle sharp corrections. Depends on severity, length of time, particular sectors affected. What I try to do is play it by ear at the time and make slow gradual incremental moves out of my less aggressive funds (like RPGAX) and into my more aggressive ones (like DODBX). I reported one such move here in early March. Since we all have varying allocation models, time frames, risk tolerances and investments, that might not be the answer for anyone else.
- Many will make a case for “doing nothing.” And it’s a convincing argument. So if that’s what floats your boat / paddles your canoe, go with it.
- @JohnN - May I suggest calling it “The Trump Bear Market”?
Addendum: Attaching blame is difficult. Like I said, the virus provided the ignition. But investor buying habits, computer driven algorithms, debt, greed, fear, trade tensions and more played a part. Surely, you did not miss the NYT article posted here a day or two before the downturn began that “Mom and Pop investor” had returned to the markets “big time”. What a coincidence.
Maybe somebody else has time to dig that one up. A classic.
BHBFX, SCHD, VWIAX and some PIMCO CEFs. I plan to raise cash because the sudden downfall whenever it happens and possibility of age biased layoff and I will need cash immediately to live on.
Presidents always get the credit, or blame, for the markets. Adherents skew it one way, deranged opponents another. It's more predictable than the weather. Not quite as predictable as the tides.
As far as plans go . . . If the rally continues I'll rebalance my IRA to about 45-45-10. If things get crazy good . . . I might look at harvesting some tax losses and reallocating some sector investments in my taxable account. The recent changes to the tax code may have altered some of my assumptions. But I need to break out the arm garters and green eye-shade first.
If Missouri is lucky and escaped the massive infections NYC suffered because they did not commute by subway, the people in Lake of the Ozarks just took a long NYC subway ride without protection. What do they think will happen? A church in Germany just had dozens of cases despite social distancing.
AS the second wave hits, it will be at least a year and probably two before people are comfortable going back out in force, and consequently at least two and maybe longer before our consumer driven economy is back to where it was in 2019, and I suspect at least 20% of those businesses will not return.
If we had massive testing and aggressive robust contact tracing we might cut isolated outbreaks off quickly but when many governors and a large number of people do not believe this is real I don't see this happening. The politicians in Georgia Florida and Texas are already trying to cover up the true case numbers and death rates
Consequently, I would not have any money in stocks that you need for the next five years. There will be buying opportunities along the way.
My cash allocation is 50% conservative bond funds 30% and equity 20% I am buying small positions in what seem to be safe dividend equities with some long shots in energy.
https://msn.com/en-us/money/markets/salaries-get-chopped-for-many-americans-who-manage-to-keep-jobs/ar-BB14EOHQ?li=BBnbfcN
@sma3, think you are taking the right approach to preserve capital.
1) How bad Covid can get. All these statements about "it only affects old people" ignore the fact that for example, here in CT the urban and suburban hospitals have been decimated. Not that there are refrigerated trucks like in NYC but the hospitals are almost completely full of Covid. 50% of the ICU beds are under 65. The only reason Yale New Haven Hospital was not overwhelmed was the social distancing and canceling of almost all other patient care. They are only now after three months tentatively restarting some elective surgeries, but only major ones.
Why won't Covid do to the poorer neighborhoods of San Antonio and Austin what it did here for example, if people don't take extreme precautions? And when it hits, most of the folks i these southern states have far higher risk factors for critical disease (especially obesity) than the NE, and they do not have insurance.
2) the pathetic federal response and the inhumane lack of leadership and even basic human decency from our commander in chief has forced states to do it on their own, perhaps permanently impairing the testing and contact tracing that other countries have used to open up somewhat safely. When the second wave hits, states with governors who lean to the "this is a hoax" ( ie Texas Georgia Florida Alabama) will have no position to reverse course without admitting they made a horrible mistake.
Until there is an effective vaccine that has been administered to 50% of the population I fear we are in for a rough ride
As for Covid, I let go of all the fear a while ago and never felt better. Fear is very unhealthy. Just be smart. If people washed their hands more, we'd have a lot less sick people overall.
do you mask?
you do know that vaccination is also for protection of all us others here, right?
maybe you don't realize that, actually.
I guess you must not know people who must live or move in close numbers either.
https://newrepublic.com/article/157773/pandemic-driving-conservative-intellectuals-mad
You did not answer the questions. But I will: For sure. And gladly.
Also, you're telling me not to get obnoxious when you doubt you'll get vaccinated? Go look up 'noxious'. You will be, literally, harmful.
https://www.vaccines.gov/basics/work/protection
so it's not simply a matter of 'different views'
If these latter four industries were regulated as heavily as "big pharma"is we would not be in some of the do do we currently struggle with. IT seems most of the objections to big pharma seem to be about their price gouging which is awful. But having the government in your pocket ( Medicare D prohibited from demanding price cuts by legislation for example) and being able to charge outrageous prices is not the same thing as putting out unsafe scientifically suspect products.