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2020 First Quarter Recap

Quarter recap

What a difference a month makes. We began the quarter with a somewhat rosy global economy, with only distant issues happening on the other side of the world. China was having troubles since December with what was thought to be a pneumonia outbreak. Combined with the wild fires that overtook Australia. When a surreal wave of chaos and worry swept the globe, creating a historic event: a global health pandemic that quickly burst into a global lockdown, practically halting the world economy.

How did Proxy react in this scenario?

In the case of our global diversification model, Core Equity, whose stats are above, we stayed our course and let our indicators tell us when to divest. We closely watched the indicators during the initial drop (-13%) from the all-times highs made in February and the rebound the market made (+5%) up to March 4th. We exited all our core funds on March 11th with the overall market down 19%, and moved to safety in a fixed income exposure, in the form of the professionally managed TOTL fund. The market proceeded to drop a total of -34%. This was such a tricky market that even safe havens were getting caught in the chaotic volatility. However, we sheltered the brunt of the storm. Once the Fed announced a number of liquidity injection measures, we added exposure to government Treasuries.

And now what?

Foremost, we are not in this for the short run. We are again applying our long standing methodologies to add risk when it makes sense to do so. As we’ve commented in our last newsletters, these are not conditions to invest “normally”, we will proceed with a lot of caution since we have two major intertwined events going on at the same time, the imminent recession and a public health threat. We are closely monitoring the quarterly earnings results coming out early April to understand how deep will the economic impact be, while we apply our tactical and timing rules to our investment choices.