Intellect & Emotion. The Known & Unknowns

(The following blog post was taken directly from our recent client newsletter)  The world of financial wellness does not turn on a dime nor operate on a 30-day cycle – that’s why my clients and friends typically receive just quarterly updates from my pen. But, as recent events begin to occupy our eyes, ears, and imaginations, I thought an “off-schedule” update might be appreciated.                 

For a bit of perspective, 2019’s solid investment performance was driven by low interest rates, low unemployment and continuing corporate profitability. That same three-legged theme carried us through the first six weeks of 2020. And while COVID-19 concerns hit our radar as the new year began, they did not factor into investor’s behavior until February was in its waning weeks.  The final week of February saw the markets experience their fastest double-digit percentage drop in history. Then, the first week of March saw the markets regain a small portion of that loss. All the while, numbers continue to show low interest rates, historically low unemployment, and continuing corporate profitability. So, how has or will this new strain of corona virus impact us?

In the near term, the U.S. and global economies have been weakened on both sides of the equation: the Supply side and the Demand side.  The Supply side where stuff is made and delivered, was clearly impacted as Chinese workers were quarantined, and the delicate supply chain was disrupted. The Demand side where stuff is bought and consumed, is being impacted as cancelations hit travels, conferences, shopping trips, and public activities as a means to limit exposure to the virus.

Based on what we know, in early March, both sides of the equation will affect the corporate earnings and economic growth, with growth slowing, but remaining positive. Business will be lost in the near term, and earnings will fall. But unlike other financial panics which reshaped entire industries, when this virus is better understood, contained or controlled, supply chains will reconnect and demand will return.

It is possible that marginal and low-quality companies could be hit so significantly, in the near term, that their recovery is unlikely. But, those are not the types of companies which fill the portfolios we manage for our clients.  When asked “what are you doing” in response to the current market volatility, our answer is “we’ve been doing it for years.” The “it” being constructing portfolios anchored with companies which pay dividends, grow dividends, and maintain sufficient cash-flow to continue paying those dividends during periods of slowing or falling profits. We’ve also been diversifying portfolios with risk control assets, such as high quality bonds.

Having said that, we believe that US companies are better positioned for the uncertain economic effects from this virus, and we continue to reduce the international exposure for many of our portfolios. We have also harvested some gains (yes, gains) from the bond portions of our portfolios – bond values rise as interest rates fall — and  reinvested proceeds in shorter duration fixed income.                                           

We’ve often written that financial wellness is a balance of intellect and emotion. The Federal Reserve exhibited that balance when on March 3rd, they lowered a key interest rate by 1/2%. Clearly rate cuts cannot cure a virus and such cuts have limited power in an environment already constrained by historically low rates across the globe. But doing so was a way to not only assist  debt payments of small and medium sized companies, but it was an attempt to restore investor confidence.                    

Our philosophy for investing isn’t a simple buy, hold and hope process. When we buy an asset and balance a portfolio, we know not only why we’re doing it in the beginning, but we also know what types of events will cause us to sell that security or adjust that allocation. The investment, economic and emotional course of COVID-19 is still unfolding. Markets have dropped and concerns have risen, but we believe the emotion has overtaken the intellect, as the unknown continues to outweigh the known. But we will keep close monitor as events continue to unfold. As always, thank you for the trust and confidence you place with us. We’ll keep working hard to maintain it.  


OSBORN Wealth Management is a fee only advisory firm dedicated to providing conservative asset management, experienced retirement planning and unbiased financial advice. Blog posts are intended for informational and educational purposes, only, and are not an offer to sell. As individual's circumstances are always unique, please consult a professional before embarking on any changes to your investment, planning, tax or legal situation. For questions on this Blog post, or general inquiries about our professional advisory services, please give us a call at 219-362-8567 or email me at

SYNERGOS Financial Services d/b/a OSBORN Wealth Management is a Registered Investment Advisor currently registered in the states of Indiana and Michigan. The firm provides fee-only portfolio management and advisory services, and is not associated with any banks or broker-dealers. For more information, please view our current ADV filing.

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