What an unsettling couple of weeks …

The COVID-19 pandemic has drastically affected both our daily lives and our financial markets. Communities everywhere are dealing with the implications of the virus and doing their best to determine the healthiest way forward.

At the beginning of 2020, we were aware of the existence of COVID-19, but the infections were far away and the numbers were small. Even now, the number of people who have tested positive, and the number of deaths, remain small compared to a typical flu season. Yet we have learned via a few weeks of steady news flow that we are experiencing a rapidly escalating situation – one that may overwhelm our hospitals and our health care workers.

What does this mean for your investments?
How are we dealing with this changing situation?

As always, we are continuously monitoring our model portfolios. We believe the holdings in our portfolios will produce solid returns over 1-3 years – especially from today’s discounted prices. We are sticking with our process and not getting emotionally caught up in the markets. However, to protect capital, we have selectively sold some equities. Last Monday, one of our technical stops was triggered and we moved about 20% of our equity pool (QWealth Elevate Enhanced Global Equity Pool) from equities to bonds. Then last Thursday, the next level was triggered, and we moved another 14% to cash. Today the Pool holds over 35% in cash and bonds. Our PUT options protect another 20% of the Pool.We feel we are well positioned, especially versus our peers and versus the indices. Here are the Year-To-Date returns, to March 17, 2020, for the main equity indices and our portfolio models.

S&P/TSX Composite Index -25.2%

S&P 500 Index -21.4%

Elevate Balanced Model -8.2%

Elevate Balanced Growth Model -7.8%

Elevate Growth Model -7.2%

As you can see, our Growth Model has held up best. Why? It holds the largest percentage in our QWealth Elevate Enhanced Global Equity Pool, and this Pool is where we have the best tools available to manage risk. It is now in a more defensive position than many balanced funds.

Unless you have more money than you will ever need, your investments need an allocation to equities. Interest rates are close to zero and cash or bonds won’t help you build your savings.

We are doing our best to make the right decisions to:
a) help grow your assets; and
b) mitigate the risk where we can.

Wishing you and yours good health as always, but especially now.

Note: Returns for the S&P/TSX Composite Index and S&P 500 Index are presented in their respective local currency and with reinvested dividends.

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