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Webinar Recording: Market Watch with CEO Adrian Cronje | March 11, 2020

Investor discipline critical amid the coronavirus outbreak and oil price shocks

Balentine CEO Adrian Cronje, Ph.D., CFA, addressed current market volatility amid the coronavirus outbreak, oil price shocks, and concerns about what this all means for the economy. The webinar addresses these critical takeaways:

  • The sharp decline in the past two weeks is notable, and we’ve seen it before.
  • This will take time to resolve itself, which means investors must remain patient.
  • Current volatility is a result of uncertainty, which markets disdain. It is critical to maintain discipline.
  • Investors can expect turbulence to the downside and upside, recognizing down days feel far worse.
  • We are watching the situation, harnessing the volatility, and our eyes are wide open to opportunities.

At this juncture, we expect there will be economic effects, but it’s too early to conclude a recession is inevitable, which is defined as two consecutive quarters of declining GDP. We do not, however, rule out the possibility of one quarter of contraction.

In either case, we are looking at an adjustment period in the markets which will take time to play out. As such, we focus heavily on four capital market indicators that send us strong messages about future economic activity: the stock market, bond market, credit market and commodity market.

Today, these capital market indicators are flashing yellow across the board. Until these four indicators are flashing red, we do not see the need to prepare for a winter.

It’s wise not to rely on any one of these capital market metrics in isolation. Whether we look at future corporate profitability in the stock market, future interest rates and fed policy through the bond market, corporate sector optimism in the credit markets, or the international economy, all indicators for us are signaling yellow.

In the interim, we are leaning into a number of silver linings:

  • Tax-loss harvesting opportunities exist, and we are taking advantage of them.
  • Opportunities in certain asset classes are presenting themselves at potentially fire-sale prices, and we are evaluating the merits of additional allocations.
  • U.S. economic fundamentals remain strong—particularly in the labor market.

And most importantly, we remind investors that in both good times and bad, the need for a consistent and unemotional process is critical. We encourage investors to read our 2020 Capital Markets Forecast as a resource and to contact us with any questions.

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