In light of recent tariff and Geopolitical events, We’ve decided to begin publishing a short piece every Monday to discuss what we think we will be doing to navigate the recent crash and eventual recovery. We have a history of being both supportive and critical of any politician or perspective, so the commentary below not intended to be a comprehensive statement or endorsement any politician, candidate or platform. Please be aware that we will need to avoid publishing certain details for compliance purposes, but are happy to discuss any of the comments with you in the specific context of your account.  

We manage the account on your behalf.  That means that we are making adjustments, increasing/decreasing cash & cash investments, making portfolio decisions and carrying the stress of market turmoil on your behalf.  We love to hear from you about your needs (and feedback), but please don’t feel the burden of managing your portfolio.  Obviously, this note is for client’s of CoCreate, if you’re not a client of our firm consider reaching out to see if we can help you enhance the way your accounts are performing in this environment.

Also, publishing about the week ahead is a difficult task and some or all of the things we say may change or play out completely differently than we expect.  Regardless of short-term market fluctuations, we will remain disciplined and committed to following our time-tested approach.

F.A.Q. (we’ll tackle one each week)

Should I increase/decrease my contributions to my account or invest some extra cash?

Setting aside the individual circumstances you might have (we can discuss these personally), you should keep your cash reserves as cash reserves, continue your contributions unless you would like to change for non-market reasons, and deposit extra cash balances that are for long-term investment into your investment accounts sooner rather than later.

When you deposit funds into your investment accounts, we don’t necessarily invest it in stocks/bonds/funds (etc.) immediately (certain business models used by other advisors might require this).  When you deposit funds in a situation like the present, we will most likely invest your excess cash in money-markets, CDs, Treasury’s, or other high-interest cash equivalents.  We have the ability to wait for the markets to settle until the time appears right to invest.  This often happens quickly, and when funds aren’t ready, we often miss the prime opportunities waiting for cash transfers to process or checks to come in the mail.  You don’t need to feel the burden of timing the market, we’ll help you get invested at the most appropriate times.

A few notes about last week’s events:

Last week was fascinating for markets.  In short, it was down, up, down, up, down, up and finished up some.  The fluctuations were mostly driven by headlines and were so quick that there weren’t many opportunities to evaluate/make any adjustments whatsoever.  In looking through the investments we hold for each of our clients, we felt very good about our positioning.  It is often a good exercise to look through the list of companies trying to justify moving on from each one and finding that you actually want the investments you own going forward.  There will still be more adjustments, but only time and better information will reveal what those might be.

This week has begun on a positive note.  Remember, when I discuss the markets and performance, I’m generally talking about the S&P 500 in this format, your accounts with us are not the same thing and are designed much more strategically.

IF you’d like more details: Last week’s markets set a couple of records in the total daily volume of trade (number of transactions) and saw two of the largest turn arounds in history on the same days.  Monday (4/7) was looking like it would be a continuation of the previous week’s selling, but then in a half-hour (9:45-10:17) the S&P changed course and shot up around 8.4%, and then had dropped 5.1% 25 minutes later.  Wednesday began the morning up 3.4% overnight, but steadily declined 4.8% throughout the day.  Wednesday from 1:18-1:27 the S&P jumped up 5.9% (+9.5% for the day). Thursday, at one point had given up much of Wednesday’s gains with a drop of 6.7%, but finished the week up about 5.7%. 

Yes, all of this was ridiculous.  All of it was relatively meaningless.  None of it was normal market behavior.  Most of it was driven by speculation about whatever comment came from Washington most recently.  The best news of the week was a 90 day pause on the “reciprocal” tariffs (which are not reciprocal at all).  The 10% baseline tariffs will remain in place.  The house and senate also passed a temporary budget for the federal government and have begun to discuss upcoming tax policy.  Regarding congressional activity, I do believe having a congress that is able to perform the most basic functions is good for market stability.  Any of us can find a host of issues with any budget ever passed by congress, but having a House and Senate that are willing to any part of their job is good.  Most of the market swings were in response to the President or his staff and it will be helpful to have all three branches begin to participate.

Regarding the tariffs, the 90-day pause is just a pause.  Hopefully, there can be productive progress during that time.  Other countries are willing to take the lead on imposing “retaliatory” tariffs if they are not satisfied with the progress.  Markets have not priced in the 10% baseline tariff and have definitely not accommodated for a trade war if one should happen.  I do expect that markets will return somewhat to a growth mode as the pause progresses, especially given the industry and company specific exemptions which have also temporarily been applied.

At the same time, expect for us to prepare for the tariffs to resume in 90 days, at which point we should have a better idea as to how those will specifically affect each of your investments.  On the one hand, Republican lawmakers are growing increasingly concerned about the political ramifications of the tariffs, which are a tax hike on the consumer.  If the Republican party wants to avoid major headwinds in the mid-term elections, it will need to deliver in a big way before February of next year.  My assumption is that the 90-day pause will be a significant deadline at which point many republicans who have not yet been critical of the administration’s trade policies will begin to express more dissent if there has not been substantial progress in a positive direction.  One of the truths we hold to be timeless at CoCreate is that politicians will always serve their next election.

Also, someone spread a rumor that Peter Navarro was going to be fired from his position in President Trump’s administration.  Navarro is a strong proponent of the tariffs. Markets jumped on this news, but we have yet to find out what is really happening there.

At the end of the week, we are still waiting to see what Washington DC will implement and how each company might be specifically affected. 

On to this week’s playbook

This week we will be watching for policy developments, though I believe it will be a little less noisy than last week with the 90-day tariff pause and other topics the news will want to cover (tax proposals, et al).  We will also be reflecting on comments made during the earnings calls which will begin next week.  Expect that first quarter earnings reports will show moderate or strong numbers but the forward-looking estimates will show severe declines as companies attempt to project the impact of unknown future tariffs on their profits.  Their comments will be particularly important.  These earnings calls may spark more broad-based selling.  We intend to be careful, patient, and meticulously strategic in how we invest and will be looking to adjust our portfolios if any of the dividends appear to be at risk.

We will also look for opportunities to harvest tax losses to offset future or current gains in our client accounts.  Our hope was to find more of these opportunities last week, but the wild swings in both directions would have made taking much of any action irresponsible. 

Where possible, we will also be looking for opportunities to increase the cash balance in client account to achieve a target between 20-30 percent (each person is a little different what they need/should target).

We’re honored to serve you through this turbulence.  We’re watching carefully and are here for you whenever you need.  The best path forward is to stay the course and continue to own well-managed, profitable businesses that pay you as an owner with rising dividends. I hope you have found this insightful.  We will continue to publish the Weekly Playbook as long as it makes sense to do it.  In order to keep from spamming you, we may not always send it by email, but will certainly post it on our website at https://cocreatefinancial.com/ and in your client portal’s newsfeed.  We double down on commitment to stewarding your investments and financial plans with diligence and integrity when the economy and markets are turbulent.  Thank you to all of you who have trusted us to do so o