In the February issue of our monthly flagship publication, we feature:

  • On the Record by Chief Investment Officer Tony Roth, where he delves into both the known risks and an unanticipated risk like the coronavirus epidemic (which originated in China but has spread to nearly 30 countries thus far) and explains their potential market and economic outcomes, as well as how it all fits into our portfolio positioning and house view for 2020. 
  • In Focus by Senior Equity Portfolio Manager Steve Norcini, CFA, who explores the subject of sustainable investing, why there may be no need for you to choose between investing according to your values and reaching your investment goals, and why you may want to talk to your advisor to learn more about integrating an ESG framework into your portfolio.
  • Investment positioning and equities asset class overview.

We are long-term investors. This self-described classification has far-reaching implications for the way we manage portfolios, particularly around the news cycle. One of our most critical tasks is to assess which risks to the economy or markets are likely to be temporary blips—often driven by headlines and thought of as “noise”—and which may have prolonged economic consequences (“signal”). Media coverage often conflates or even swaps the two, with the amount of coverage frequently a very poor barometer for what matters most to long-term investors. It is to the signal we want to pay the closest attention, and that which could potentially require a change to portfolios.

Just one month into the year and a slew of risks, such as the coronavirus, have already cropped up, threatening to derail the economic expansion or the impressive run in the stock market. Some of these were on our radar leading up to the start of the year, as outlined in our 2020 Capital Markets Forecast, but some were not—most notably, the spread of the deadly coronavirus that has raised anxieties worldwide. We are reminded of former Secretary of Defense Donald Rumsfeld’s famous distinction between “known unknowns”—where we are aware of the risks but their outcomes are not yet apparent—and “unknown unknowns”—risks that were totally unforeseen with unclear implications. I will highlight the most pressing risks as we see them today and explain how we are thinking about the potential effects of these risks on our economic and market outlook for 2020.

Please see important disclosures at the end of the article.

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