Preparation Beats Reaction

Note from the CEO:

On Monday, March 9th, the financial markets suffered their largest single-day losses since the financial crisis in 2008.  Over the past 48 hours, the most common question I have received is, “How did you react?!” 

I believe the more important question to ask first is, “How did your clients react?”

The answer to this question is that our clients did not experience the “amygdala hijack”(1) that many investors felt as their portfolios plummeted with the markets.

The answer to the first question is that preparation through true diversification trumps reactionary measures almost every time.

Below you will find the commentary from our Chief Analyst, Adam J. Packer, regarding our thoughts on the market volatility through the lens of serving our clients and their families.

Without Wax,

Kevin A. Kaylakie, CFP®, CPWA®

Founder & CEO | SineCera Capital


Commentary from the Chief Analyst:

On March 5, famed VC firm Sequoia Capital published a letter to their portfolio companies’ founders and CEOs, titled “Coronavirus: The Black Swan of 2020” which you can read by clicking here. Many have noted similarities between this memo and a prescient presentation that Sequoia gave to their portfolio companies executives just before the 2008 financial crisis, titled “RIP Good Times.”

In short, the coronavirus memo cautions its target audience to prepare for a prolonged period of declined economic activity and limited access to capital. As the memo warns, “[a] distinctive feature of enduring companies is the way their leaders react to moments like these.”

How are we at SineCera Capital “reacting” to moments like these, a period in which we have seen record declines in oil, and circuit-breaker-triggering declines in equities? Well, our All-Weather Core portfolio has performed as expected, providing our investors with ample downside protection during these turbulent times. So, we are not so much reacting to the market as proactively preparing for what’s next. Namely, we’re rebalancing our All-Weather accounts to realign our risk exposure across equities, fixed income, and inflation-hedging assets to the following targets:

SineCera All-Weather - Risk Allocations

 
Risk+Contribution+Meter.jpg
 

Over the past few days, the market correction and corresponding rally in long-term Treasuries have led to an overweight in interest-rate (i.e. fixed income) exposure. The severe downturn in oil prices and energy stocks have also led to us being heavily underweight in inflation-hedging exposure. We’re not market timers, and don’t know when the market will bottom. But we will remain tactically overweight interest-rate exposure and underweight equities and inflation-hedging assets as downside market volatility remains elevated.

Our goal at SineCera Capital is to help our clients invest with clarity, confidence, and purpose. We believe the best way to do this is to provide a well-balanced, deliberate, and diligent investment process.

As our mission statement reads, “we do not take this task lightly” when it comes to managing our client’s assets.

OUR MISSION

The money you have entrusted to our care represents years of hard work and sacrifice. The advice we give and the actions we take will impact you, your family, and the community for generations to come. We do not take this task lightly.


As always, if you have any questions, please do not hesitate to contact us.

Best Regards,

Adam J. Packer, CFA®

Chief Analyst | SineCera Capital


 

Disclaimer: The information provided is for educational purposes only. The views expressed here are those of the author and may not represent the views of SineCera Capital. Neither SineCera Capital nor the author makes any warranty or representation as to the accuracy, completeness or reliability of this information. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall SineCera Capital be liable to you or anyone else for damage stemming from the use or misuse of this information.

(1) “Calming Your Brain During Conflict,” Harvard Business Review, December 22, 2015 https://hbr.org/2015/12/calming-your-brain-during-conflict