MBI and CBM: Market Outlook

Dear Clients and Colleagues:

We sincerely hope all is well with you and your family. The turmoil in the DC area and around the globe has been beyond belief.

In response, the markets around the world are experiencing unprecedented levels of volatility. There is uncertainty about the actual impact on businesses and corporate earnings going forward, but the early estimates point to a reduction in almost all sectors of the economy. The markets, as expected, have been rapidly digesting all available information. Generally, the stock market is looking ahead and “discounting” for 6 to 12 months. We are experiencing a truly historic time.

The governments and central banks around the world have been responding. In the U.S., the Fed reduced interest rates to zero and essentially suggested an unlimited amount of liquidity for businesses and financial institutions. We are awaiting an additional response on the fiscal side which may include paid sick leave, food assistance and extended insurance coverage for those in need. Certain other actions may be taken including payroll tax cuts and direct payments to individuals.

From an investment point of view, we suggest a two-stage approach to portfolio management during the market volatility. The first stage entails harvesting capital losses for tax purposes in taxable accounts. These losses would be used to offset taxable capital gains in future years and help reduce your taxes. Normally, the proceeds would be reinvested to capture lower prices and maintain the investment allocation at the targets set for you.

You may also benefit from converting your IRA into a ROTH IRA. This is an amazing strategy for tax free distributions in the future. Feel free to reach out to us if you have any specific questions about this strategy.

We also recommend that our clients rebalance their portfolios semi-annually to ensure proper diversification. It is very important that individuals who are close to retirement or who need current distributions from their portfolio are protected in times of market volatility. Fixed income, bonds and cash should be your friend, providing distributions for an extended period in a down market.

The second stage would be a plus. You may want to use some of your fixed income to purchase stocks and equity funds at cheaper prices. It is virtually impossible to time the bottom of the market and we carefully watch the markets for signs of recovery. You must consider your personal strategies and objectives if you decide to pursue this approach.

These times remind us about the role of psychology in the disciplined approach to investing. Warren Buffet once said: “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” Lower market prices create a good time to invest in equities for those who are focused on the long term and courageous enough to seize the opportunities.

As always, feel free to reach out to us if you have any questions. We are here to help.

Alex S. Seleznev, MBA, CFP®, CFA

Senior Advisor & Portfolio Strategist | Councilor, Buchanan & Mitchell (CBM) | www.cbmcpa.com

Co-Founder | May Barnhard Investments (MBI) | www.MayBarnhardInvestments.com

7910 Woodmont Avenue, Suite 500, Bethesda, MD 20814

D: 240.781.6214 | O: 301.986.0600 | E: ASeleznev@cbmcpa.com

MBI and CBM: Market Outlook

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