Coronavirus (COVID-19) and Portfolio Strategy Update | Fee-Only Financial Planners Long Island |

By Steven Rogé, MBA, AIF®, CMFC®
Director of Research and Portfolio Management

As you are undoubtably aware, the Coronavirus (COVID-19) is all over the news affecting people’s emotions, stock market volatility, and in some cases their lives.  If you are wondering how this is affecting your portfolio, keep in mind that R.W. Rogé & Company, Inc. manages risk adjusted diversified portfolios, that contain stocks, bonds and cash.  So, if you hear that the stock market is down 3% for the day, our portfolios may be down roughly 1.6% for the day (results may vary depending on risk tolerance and target asset allocation).

When we have stock market events like this, remember that the folks selling their stock positions are either buying bonds or money markets with the proceeds. That drives up the price of bonds and helps mitigate some of the portfolio’s volatility.

While we are not epidemiologists, we are focused on learning what we can about the Coronavirus and how it effects human psychology and the world economies.  Learning all we can about the situation, helps us make better decisions regarding portfolio positioning.  Profits matter, and how the Coronavirus impacts the global economy will ultimately affect how our portfolio’s will perform.

Here is what we know from reputable sources such as the World Health Organization (WHO) and the Center for Disease Control (CDC): COVID-19 is believed to spread through respiratory droplets that pass when an infected person coughs or sneezes. According to WHO, 80% of cases are mild and mortality rates outside of China are less than 1%.

There are a couple of pharmaceutical companies and Universities already in development of a vaccine.  According to WHO, Gilead Sciences is in late stage testing of a drug called Remdesivir which was originally developed to treat Ebola but looks promising for treating the Coronavirus.  As with all events like this and Ebola, SARS, etc. they are usually short-term events.  A year from now this could be off the news media’s radar screen if it is being properly contained.  When we get our flu shots later this year, don’t be surprised if it contains the antigens that create the antibodies for the Coronavirus.

We are watching the virus’s effect on global growth in what is already a low-growth environment.  Prior to the outbreak of the virus we were monitoring a slowdown in the economy, and it seems like worries over the virus could push us to a zero-growth environment for the second half of this year.  Supply-chain disruptions in many sectors of our economy can further dampen economic growth.  This coupled with slightly higher than average valuations could indeed mean that we will experience a pullback in the stock market, which we are now experiencing.

While it is anyone’s guess how long and far the stock market may correct, it is important to remember that we take these temporary declines in the stock market into account when building our client portfolios.  Further, we stress test every portfolio within our financial plans with a “Bad Timing” scenario that puts a portfolio through an extended downturn.

While we don’t expect any major changes to our client portfolios at this time, please keep in mind that we’ve spent the past couple of months reducing exposure to riskier bonds in favor of safer government backed bonds.  As a result, our client portfolios have benefited from the recent move to “safe-haven assets” by dampening the impact of the sharp stock market decline.

We will also continue to monitor asset allocations and will rebalance when appropriate. This periodic rebalancing over long periods of time may help two-fold.  First it maintains the proper risk in the portfolio, and second it forces an investor to sell appreciated assets and buy those that may be undervalued.

The loss of a life is tragic, and it unfortunately looks like there will be more before governments can work together to contain and treat COVID-19 virus.  While this is a highly contagious virus, we have confidence that governments and the private sector will be successful.  We remain ready to reevaluate continuing economic conditions as more information becomes available and will be pro-active with any changes, we deem necessary.

We encourage any additional questions you may have on how this event has affected your portfolio and personal financial plan.

© Copyright 2020 R. W. Rogé & Company, Inc.  All Rights reserved.

Steven Rogé, MBA, AIF®, CMFC® is Director of Research and Portfolio Manager of R. W. Rogé & Company, Inc.  One Corporate Drive, Suite 101, Bohemia, NY 11716.  Phone: (631) 218-0077; Website:


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