This Week from Jesse Hurst
Jesse W. Hurst, II
CFP® CERTIFIED FINANCIAL PLANNER™
AIF ® ACCREDITED INVESTMENT FIDUCIARY


Horizon/Impel Wealth Management 
Investment Committee Perspectives
March 2020
Executive Summary 
 
* The spread of the Covid-19 virus has caused great uncertainty from both a health and an economic standpoint around the globe.
 
* The US and global economies were showing signs of accelerating growth heading into this viral epidemic. Economic reports through February and into early March evidenced this.
 
* As people around the world are subject to either government imposed or self-imposed quarantines and social distancing, economic activity will slow dramatically for a period of time. This will start to show up in economic numbers and reports soon.
 
* On the other side of this crisis, we will move back into a world where the fundamental economy was strong and has been injected with multiple bouts of stimulus. This includes lower interest rates, additional cash flow from home refinancings and lower gasoline prices which will give consumers more spending power.
 
* Have faith, this too shall pass. Human ingenuity and innovation have gotten us through many scenarios like this in the past. We will come through this as well. Our TEAM is here for you as we work through this TOGETHER!!
 
The joint investment committee of Horizon and Impel Wealth Management met on the afternoon of March 9th, 2020, as markets were continuing their recent downturn from all-time highs reached less than three weeks ago, on February 19th of this year.  It is interesting to note that this comes on the 11-year anniversary of the market bottoming during the financial crisis and Great Recession of '08 - '09.
 
There is significant uncertainty in the markets due to the spread of the coronavirus globally. We know that economic activity in China has slowed to a halt but is now starting to ramp back up again. The first cases of coronavirus were reported in late December. Anecdotally, according to a client of mine who oversees manufacturing at multiple plants in Southeast Asia, they are operating at approximately 80% capacity today, and hope to be back to 100% capacity by sometime in early April.  This means that the ramp up to full capacity will come approximately four months after the start of the viral spread.
 
If a similar pattern plays out in other places around the globe, as well as here in the United States, we would expect to see the number of cases reported continue to grow as more people are tested, most likely through April and into May. We would hope that by June or July, we are on a similar trajectory back towards normal, similar to what has happened with past viral outbreaks, such as SARS, MERS, Ebola and ZIKA.
 
We know that there will be a significant short-term economic impact to all of this. However, it is important to remember that economic activity globally and particularly in the United States was accelerating up until the time of the coronavirus outbreak. A look at recent data points confirms this thought process. The PMI index of the U.S. services sector, which makes up over 86% of the U.S. economy, unexpectedly rose from 55.5 in January to 57.3 in February just before the viral outbreak. Additionally, the March jobs report showed that unemployment in February dropped to 3.5%. While there was an expectation that 175,000 jobs would be created, over 273,000 jobs were created with upward revisions for the last two months, adding an additional 85,000 jobs. This shows that the economy was on relatively strong footing prior to this viral road bump.
 
Uncertainty and headline risk will reign for the next several months as every data point is trumpeted by the 24-hour news media and also spun around endlessly in social media circles. This will likely lead to bouts of volatility as good news may cause the markets to move up one day, only to move down the next day as a new bad headline comes forth. This is to be expected and this is something we will have to watch play out over the next six to eight weeks or longer. As well-respected market strategist Jeff Saut often reminds us, bottoming is a process, not an event.
 
On the flip side, there is a growing school of thought that lower interest rates from the Federal Reserve Bank, who unexpectedly cut rates by 50 basis points last week and may do something similar at their meeting next week, along with lower oil and gas prices, and a wave of  mortgage refinancings are combining to put additional cash into people's hands. This is the equivalent of a tax cut or stimulus and could spark an economic rebound in the second half of this year. We will have to continue to watch and monitor as these events play out.
 
From a technical standpoint, the market is extremely oversold. The S&P 500, well below its 50-day and 200-day moving average, has moved down from its recent peak of 3,394 by 19% to a low of 2,747 at the close of markets yesterday. Interestingly, we have learned that Warren Buffet, who said the best way to make money in the markets is to be greedy when everyone else is fearful, put his money where his mouth was and bought 976,000 shares of Delta Airline stocks, which had been severely beat down by the coronavirus trading.
 
It is also interesting to note that according to Morningstar, in the last 40 years since 1980, the stock market has only had eight previous episodes where the market turned down by 3% or more two days in a row. In each of the previous eight cases, the stock market was higher one year later, and while the worst-case scenario was a gain of 9.1%, the average gain from these eight time periods was a gain of 24.7% over the coming one year. This gives us confidence to move forward with rebalancing accounts, as stock markets are low and bond markets are at all-time highs as interest has plummeted. We think there is wisdom in doing this as long as you maintain any liquidity you need for short-term needs over the next 12 to 24 months in money market and short-term bond positions.
 
Times like this make for very interesting and sometimes stressful days for our clients and for the members of the investment committee. Please be assured that we are paying enormous attention to this and take the responsibility of managing your hard-earned assets very seriously. Should you have any questions regarding these notes, plan do not hesitate to contact your advisor. Thanks, and have a great day.
 



*Investors cannot directly invest in indices. Past performance does not guarantee future results.
*Investments in securities do not offer a fix rate of return. Principal, yield, and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested. No system or financial planning strategy can guarantee future results.



Sincerely,

Jesse W. Hurst, CFP®, AIF®
Investment Advisor Representative

Your Team at Impel Wealth Management
      
2006 4th St.
Cuyahoga Falls, Oh. 44221
Phone: (330)800-0182
Fax: (234)312-0460
Website:  www.impelwealth.com 

Emails:
Nathan.Ollish@impelwealth.com  
Leslie.Campanini@impelwealth.com  

  
*The views stated in this letter are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. *
  
Securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker/dealer and a Registered Investment Adviser.
Cetera is under separate ownership from any other named entity.


Is there something we can help you with?  Please call me at 330.800.0182 or email me directly at jesse.hurst@impelwealth.com.

Impel Wealth Management 
2006 4th Street, Cuyahoga Falls, OH 44221    
P: 330.800.0182    TF: 844.422.5550    F: 234.312.0460