Portfolio Change to Balance Market Opportunities and Risks

Picture of Neelesh Champaneri, CFA®, CAIA®
Neelesh Champaneri, CFA®, CAIA®
market volatility during COVID

In recent weeks, stock and bond markets have been turbulent as the current and future impact of the coronavirus is being incorporated into investment markets. With our upcoming quarterly investment update, we will provide a more in-depth update on recent market events.

Market Volatility During COVID-19

As is our practice, we are monitoring portfolios to balance risks and opportunities within markets and make adjustments where appropriate. Over the course of 2020, high yield bonds shifted from paying ~3% above U.S. Treasury debt, to paying ~8% above Treasuries. While we have generally avoided higher risk bonds in recent years due to the low-interest rate premiums relative to the risk taken, the current environment has resulted in these bonds moving from prices in their most expensive quartile relative to the past 20 years, to being priced in the cheapest quartile.

Purchasing high yield bonds at current rates has typically led to favorable outcomes when viewed from a multi-year perspective, as indicated in the chart below. To implement this change, we will transition investments from the Pimco Income fund to the Artisan High Yield fund. The change will primarily take place within bond-oriented portfolios, and for equity-oriented portfolios, we will continue to monitor equities for favorable purchase opportunities.

We welcome the opportunity to answer any questions you may have. Contact us to learn more about how WFA can partner with you to grow and protect your wealth.

Three-Year Average Annualized Returns by Starting Interest Rate Level

Three-Year Average Annualized Returns by Starting Interest Rate Level

This communication contains the opinions of Wade Financial Advisory, Inc. about the securities, investments and/or economic subjects discussed as of the date set forth herein. This communication is intended for information purposes only and does not recommend or solicit the purchase or sale of specific securities or investment services. Readers should not infer or assume that any securities, sectors or markets described were or will be profitable or are appropriate to meet the objectives, situation or needs of a particular individual or family, as the implementation of any financial strategy should only be made after consultation with your attorney, tax advisor and investment advisor. All material presented is compiled from sources believed to be reliable, but accuracy or completeness cannot be guaranteed. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENTS BEAR RISK INCLUDING THE POSSIBLE LOSS OF INVESTED PRINCIPAL.

Wade Financial Advisory, Inc. is an investment adviser registered with the Securities and Exchange Commission. Registration of an Investment Advisor does not imply any level of skill or training. A copy of current Form ADV Part 2A is available upon request or at www.advisorinfo.sec.gov. Please contact Wade Financial Advisory, Inc. at (408) 369-7399 with any questions.

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