March 2020 – Special Market Update

Market Update We’d like to start off with some positive news, the whole country and economy is NOT shut down. Most people were at work today and can work from home if need be. China looks to be improving and we’re receiving guidance daily from our state and federal government on how to limit the spread of the Coronavirus.

In the 4th quarter of 2019, we moved our portfolios to a more defensive allocation as our research was saying the market was the most overbought in 80 years and due for a correction. We believe the Coronavirus would have caused stock market volatility regardless, but the fact that the market was so overvalued has amplified the recent drops. We are currently at stock prices not seen since 2018. It’s hard to fathom 2019’s impressive gains in the major US stock market indexes have been wiped out in just 1 month. With all of the news headlines and general panic we’ve seen in the stock market and the media as of late, we wanted to send out a quick update on what our game plan is moving forward.

Overall, we are trying to remain extremely diligent in managing our portfolios during this time of extreme volatility. We picked our least favorite stock market index currently, the Russell 2000, and are betting against it as a hedge. As of Monday’s massive drop, our Inverse (short) Russell 2000 fund is up over 45% since we added it to the portfolio earlier in the year and that has helped to offset market losses. Included in our stock selections are sectors we expect to continue to outperform, such as consumer staples, which includes many of the items people are currently scrambling for (like hand sanitizer, toilet paper, cleaning supplies), as well as healthcare, which is not laying off their labor force anytime soon! We feel we are positioned appropriately given the current circumstance and volatility.

In our most recent market commentary at the end of February, we suggested the Federal Reserve would likely cut interest rates in the very near-term and would possibly resort to more extreme measures if that proves to be ineffective. Well, it’s amazing how much can happen in just 2 weeks time! The Fed has since cut interest rates twice and begun a $700 billion quantitative easing program. The likes of which we have not seen since the 2008 financial crisis recovery.

So far the Federal Reserve action seems to have missed the mark as the stock market once again had a monumental drop to start the week. We believe the market will rally before the election because President Trump will do everything in his power to get re-elected. The market may get much worse, however, before it gets better. Depending on the progress of the current quarantine measures, President Trump may wait for the dust to settle on the Coronavirus hysteria to implement a potential payroll tax cut for the middle class. It would probably make sense to save some of the economic stimulus closer to the election to heighten its effect.

We are still patiently waiting for evidence that the worst is behind us, in which case we plan to buy in low and take our hedging strategies off. Overall, we strongly believe that in the short-term to intermediate term, the best move is to continue to be defensive and wait for the appropriate signals before we go long and fill up the portfolios with stocks again. Rest assured we are watching the markets every day and will move 100% into cash if we deem it necessary. We are working harder than ever to protect your money.

If you are a client of ours, we encourage you to go online to see your performance, but for the average client who is moderately invested, since the market peaked, our Moderate portfolio has outperformed the Dow Jones Industrial Average by 31%. Please share this information with your friends and family who do not have an advisor that manages their money daily like we do for you. There’s a chance this market will get worse before it gets better, so now is a good time to move to our management.

If you do have any questions about your investment portfolio, signing up for our 401(k) recommendation service, your taxes, or anything else in general, please give our office a call at (586) 226-2100. Feel free to forward this commentary to a friend, family member, or co-worker. If they would like to receive this commentary in the future, please send us an e-mail at info@summitfc.net at your earliest convenience. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

Thank you for your confidence and referrals!

Bob, Ken, Jim, and Zach Summit Financial Consulting

Notes & Disclaimer: Stock market indices, like the S&P 500 Index, are unmanaged groups of securities considered to be representative of the stock market in general or subsets of the market, and their performance is not reflective of the performance of any specific investment. Investments cannot be made directly into an index. Historical returns data are calculated using data provided by sources deemed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, or correctness. This information is provided “AS IS” without any warranty of any kind. All historical returns data should be considered hypothetical. Past performance is no guarantee of future results.

This communication is only intended for recipients who reside in states where our agents are licensed to sell these products. Investment advisory services are offered through Summit Financial Consulting, LLC, an SEC registered investment advisor. Registration does not imply a certain level of skill or training. Summit Financial Consulting Investment Advisor Representatives do not render tax, legal, or accounting advice. Insurance products and services are offered through Summit Financial Consulting, LLC. Note: Please update Summit Financial Consulting, LLC, if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually. Please consult Summit Financial Consulting for a copy of this document should you need an additional copy. All guarantees are subject to the claims paying ability of the issuing insurance company. Past performance cannot predict future performance. It is not possible to invest directly in an index. The Sherman Group, LLC is not associated with Summit Financial Consulting, LLC in any way, other than a research sharing partnership. Back testing is more heavily scrutinized than any other type of investment analysis because it can be updated to take advantage of past data. The algorithms and trading signals that we receive from the Sherman Group, LLC were created using back testing with the goal of creating a sustainable research process. We have reviewed data from the entire 20 year period which was mostly back tested, and have also personally reviewed the live data for the past 5 years and feel comfortable with it, but we encourage you to meet with us and ask questions so you are fully informed on what we plan to do with your investment assets at TD Ameritrade. It is important to look at fees, taxable repercussions, and trading frequency when looking at a rate of return number. There is no perfect system or research feed, and Sherman Group, LLC has had both longer term and short-term periods where they lost money. Investing involves risk, and these portfolios are no exception.