Coronavirus Updates

Coronavirus Updates
May 28, 2020 - Week 14 Update

Dear all,

At the start of this week I was going over my 2020 calendar reviewing the upcoming important events, previously scheduled for the months ahead. As it now stands, football fans in Europe and around the world will not be rejoicing the start of the UEFA Euro 2020 Championship in June (I am starting with the one that hurts me the most). Meeting of the historians commemorating the 500 years of the summit between Henry VIII of England and Francis I of France at the Field of the Cloth of Gold will not happen. America was supposed to be hosting the G7 summit, which seems to be delayed until a better time in the future. I do not know how diplomats will celebrate the 75th anniversary of the signing of the United Nations Charter of 1945. The Summer Olympics in Tokyo are moved to next summer, so we will have to wait longer for 3x3 basketball, skateboarding, and karate tournaments to be seen by all. Being invited to participate for the first time after 400 years, Wampanoag Nation might have to wait even longer than this September to celebrate the arrival of the Mayflower bringing the first Pilgrim settlers, hosted by English, Dutch, and American event organizers. The 43rd Ryder Cup should be held as planned, with social distancing rules implemented, of course. Let us hope, Wisconsin will be a great host for the golf tournament, and that Americans will use the home advantage to show Europeans who owns the game of golf now. On the other hand, I doubt that the 2020 World Expo, scheduled in Dubai for this October, will host the planned 25 million visitors, organizers were hoping for. Further, I doubt the United Nations’ Climate Change conference, planned to be held in Glasgow in November, will see the expected 200 world leaders. Let us hope the world remembers that this December will be the 250th anniversary of the birth of Beethoven, and that we can mark it, and celebrate it, with some serious music, together.

The pandemic surprised us all. Blocks in our calendars are crossed-off or rescheduled. We are fighting a global natural disaster. Priorities have changed, but life must continue. Things will be different, for sure. As discussed in the previous 13 letters I wrote, I counted at least a dozen big changes I foresee in the way we perceive and continue to live our lives.

Over the last seven years I often wrote about deglobalization and a turn towards regional integration of defined spheres of influence of existing and emerging superpowers. This geopolitical process will likely be sped up with the Covid-19 effects. The processes of increasing debt, lower economic growth, and low interest rates in developed countries, should also continue, on the other side of the crisis. However, this is not me being pessimistic, as I do feel that growth in asset values will still be there. Over time, humans consume an ever-increasing amount of goods and services. Technology should continue changing, improving our lives and rearranging the list of highest-valued companies of the world, once again. Productivity will likely improve further. Investment options will likely increase while lowering the cost of participation and becoming more transparent. Opportunity presents itself for pickier and more active investors in the future.

This week in the markets brought us some rotation between value and growth stocks, we have been expecting. The S&P 500 climbed over 3000 reaching a particularly important psychological and technical number. The index was pushed higher by the mentioned rotation, brought in part by continued positive news about reopening of the global economy, improved liquidity, and optimism about possible vaccines being available soon. The Fed continuation of purchases in corporate bond markets is closing the price gaps and allowing for the increase in new issuance.

Some economic data is coming in a little better than expected. It still looks like the American consumer is relatively strong, joined by strong consumer spending in countries less effected by the disease, like Australia. On the other hand, as I noted in my earlier letters, I still fully expect to see bad unemployment numbers. The question is how fast can that number be lowered with businesses reopening and rising to a full output over the next year. With the Fed determined to make money available, interest rates will likely stay low, with the 10-year treasury possibly locked somewhere between 0.5 and 1%. Money being put to work, has both low valuations and low interest rates to help get it into the stock markets. We might see an increase in inflation over the next few years, which might be just enough to start bringing it into normal levels. Most importantly, sense of normality is returning with an improved organization and leadership at the states’, national levels of government, health systems, and major corporations.

With panic subsiding, liquidity improving to repair capital markets, and WNY starting the all-important second stage of reopening in the next week, this will be the last one of my weekly update letters for this crisis. I will continue to write and keep you updated on everything impacting your accounts, but I believe it is now time to change the frequency of these letters to a monthly schedule. These last 14 weeks were extraordinary. I am sure this period will be studied and discussed by our descendants for many years to come. The health and economic crisis is not over yet, with the recovery and repair ahead of us. Judging by historic precedents (again, none exactly like this one), it will not be easy, and the road ahead will not be a straight line. However, I feel that the time of the unknown and complete instability is now behind us.

It is time to draw a line in the sand and turn our heads to the future, determined to regain what was lost (tangible as well as the intangible), and continue to grow. The growth needs to happen in our daily lives, on our calendars, and in our statements. This is the only way to act, if we want to excel in life. We are here to help guide you with all your financial needs, as always. As we begin to move back to our normal schedules, we will continue to see you via videoconference meetings and over the phone, although I am looking forward to the day we get to see you in-person again.

All the best...

Emir Culov
Partner, Portfolio Management Director
Previous Updates

Dear all,

Housing reports are showing a new increase in demand for houses with privacy and pools in Upstate New York, Connecticut, and New Jersey. The pandemic has caused many families to reconsider living with kids in a big city. Even though there is a lot to lose socially, opportunities, and timewise with leaving the city life, the concern with possible future waves of the virus seems to outweigh the perceived benefits and perks of city living. The increased interest in having more space, a larger yard, and assumed added safety, is creating a new balance between the cities and their suburbs.

In 1980, NYC transit workers went on strike, paralyzing the city and forcing commuters to look for different ways of getting to work. The commuting habits around the greater metropolitan area changed forever after the strike ended. Today, in big cities around the country, you will find professional women wearing sneakers and walking with a shoulder bag carrying the shoes they will change into at their office. In large numbers, people also began biking to work and carpooling. These things were unheard of in New York City before the 1980 Transit Strike.

We don’t really notice it now, but pretty soon we will be witnessing some changes in how we live our lives that may be lasting. The awakening to a different type of a workday, following a very different rhythm. Normal work activities will get disrupted and blended with our personal lives. Some of the peers and partners, whom I only previously met in a professional office setting, over the last couple of months, taking meetings via video conferencing (Zoom, FaceTime), gave me a chance to meet their spouses, kids, pets, and personal decorating styles. This is all fine, as the more we learn about each other, the more we understand one another, making it easier to communicate.

Through this pause order, most people had a chance to evaluate their usual activities, analyze the possible ways to improve the way they live, and even some to reconsider their priorities. This soul searching in some cases will result in either immediate, or near future changes.

The effect of this changed mentality (whether it is long or short term we will only be able to tell after the dust settles), did not leave us untouched. Here at CWM, one of our own has decided to embark on one of those big changes. Vanessa Shady, who acted in the role of a Registered Account Manager for the last 5 years, has decided to leave work and focus on her young and growing family. Given that most of us can relate to the struggle of properly balancing work and time spent with the young kids, remembering how precious it is and how fast it goes by, we understand her decision. While Vanessa has been a colleague for almost two decades, working with us in multiple organizations, we have also built a lasting friendship and care for each other. At this juncture, I would like to take a moment and wish Vanessa all the best. She will be missed here, by us, our partners, and our clients.

Flexibility and understanding for the life/work balance may increase. Before the pandemic, working from home was considered an employee benefit that had to be justified and required a special approval. It is already becoming realistic that many companies will choose to reallocate some of their workers away from expensive office buildings to the employee’s home offices. Organizational structure of these companies will have to become more dynamic, more team and function oriented. Technology was already there, but the demand was not drawing the attention of inventors and designers to further develop gadgets to improve the software for workflow and communication needed. This is certainly changing fast. New products that help our daily life while distancing and being around our home more, short of a “beam me up, Scotty” (which I would love to avoid time spent in airports and airplanes), could be used by most of us as early as next year. Even my parents, who I was happy with if they knew how to reply to my text, are becoming zoomers, and only want to video conference now.

The cities might change next. If enough people decide to work from home, traffic congestion would ease, parking spots would open up, and the air would be cleaner. Commercial buildings would turn into residences and hotels, or make more space for parks, further changing the character of urban areas. This might not be overnight, but think of the ideas for cost cuts in the mind of the executives once another crisis comes. That rent is usually at the top of the expense charts. These changes are not going to happen because of the virus, but because the virus was a big enough test for the opportunity for, eventually, improvements in our way of living.

Wealth management industry should change with times too. Advisors who see improved digital resources as an opportunity will likely embrace the transparency and access that financial applications and online resources provide. Failing to adopt to preferences and expectations of millennials may translate into loss of influence, relevance, and clients (or clients’ children who become legacy clients). Diversification became a boring conversation for some of you in the long bull market we had. However, you may be willing now, more than ever before, to talk about all aspects of your financial life and planning for it. The expectations for advisors to spend more time with clients, whether on the phone, FaceTime or Zoom, working on personal goals and playing the role of educator should be growing. This pandemic forced both you and us to get more comfortable working remotely when it is needed. These remote consultations will likely become normalized and used in addition to scheduled, in-person, planning appointments. In other words, calendar based, once-a-year updated client plans will likely be no longer sufficient. Tactical and more flexible communication and updates with higher frequency will likely become a norm.

There could be more control set around algorithmic trading to mitigate the perverse impact they can create. Regulators may consider rules to governing short selling in times of crisis, like they already do in Europe. A further push for fiduciary responsibility may be seen soon, and many would welcome it.

Advisors might retire in greater numbers than planned in the pre-pandemic period. Many professionals may decide that, after the 2008 and the 2020 crisis, they have had enough of the pressure and responsibility. With uncertainty increasing in the financial sector, tighter regulation and educational requirements, we would expect to see advisors leaving the industry. Those whom stay will have to embrace holistic wealth management and understand the clients’ expectations. The “in-person” element of the advice is becoming even more important.

We, here at CWM, are ready and excited about the future. We were tested through this crisis in many ways, but our systems and processes worked without glitches. Your account accesses worked properly, our trades were executed timely and orderly, our reporting and communication were flawless, even though many in our industry had problems with some or all of these things through March and April. The practice we started building in 2018 is client-focused, and process based. Technology and regulatory improvements can only benefit us. We will embrace them and continue to grow.

Thank you all for your trust. I know I speak for all of us when I say we will continue to work hard to keep it earned. Please read the attached Outlook reports from Wells Fargo Investment Institute and First Trust. It is good to stay updated on economic and market data and near-term views of some very respectable research institutes.

Spring is finally here. Try to enjoy it while staying safe.

All the best,

Emir Culov
Partner, Portfolio Management Director

Dear all,

Having the TV on, reading papers, talking to neighbors from a safe distance, and to friends and family over video chats, all I hear is Reopening. When are we reopening? How are we reopening? What are we reopening first? Are we reopening correctly? Are we reopening too early?... And so, on and on…

Obviously, reopening is extremely important. People are right to be asking about it and have concerns. The recession we are in is caused by closing businesses and ordering the population to stay home. Those closings and stay-home orders were needed to save lives and allow the health care system the time needed to create capacity and fight the disease with the best possible chance. However, we cannot stay at home forever.

No one really knows exactly how long firms facing zero revenues, will be able to survive financially. Businesses can go on temporarily, burning through their cash and lines of credit available. Corporate bond markets are working again, and some firms are borrowing large amounts to improve their chances in the case of a prolonged return of demand. The funds available are not unlimited. Further delay in scheduled reopening’s and restarting businesses would start upending norms in behavior of the participants in the economy. A growing number of renters are no longer paying their landlords. Other creditors and business partners are being put off as well. Enforcing contracts will become more and more difficult with many courts closed and the cultural overconcern about peoples’ and businesses’ situations. This is a way for week businesses to infect the healthy ones. With the uncertainty of property rights and unreliable income streams, valuing business and investment projects is extremely difficult. That is how an economy comes to a halt. A loss of trust in business agents, partners, absolute protection of private property, and legal system can take away the flexibility, speed, and strength of our economy. So, getting back to business of doing business in every industry and every profession is extremely important.

These last few days the reports about reopening were negative. Some states are prolonging shutdowns, some have spikes in the new infections as they are reopening, and some fear that the reopening is being executed too fast and are extending the debate about the timing and schedule of reopening. Meanwhile, the stock markets reacted to this news. Values moved down but will hopefully stay in a range without fully retesting the bottom on March 23rd.

The economy created after this reopening will, for a while, be undoubtedly smaller than the one we enjoyed until January of this year. Many are naming it a “90% economy”. No matter the official reopening, there will be a residual fear, pervasive uncertainty, a lack of innovative drive in most industries, and deepened inequalities. Going to a ball game, or having a drink at the bar afterwards, will continue to be missing. That “small” piece of life will be driving our conversations and behavior, and most likely cannot be offset by the fact those things that matter will still be available and moving further with the growth.

“The Bar Test” will be a good demonstration if a 90% economy, which cannot be controlled by government orders, is recovering faster than what we would expect. Allowing bars to open counts for little, if people do not want to visit them regularly. It remains to be seen what happens. I am sure you will be reporting your impressions of the test to me over the next few months.

With most of our clients still considered residents of NYS, and since the impact of Covid-19 took the largest tole here, I have included the list of requirements, set forth by NYS officials, for all regions of NYS required to lift the stay at home orders.

Thank you for your comments, words of support, and most of all your trust. Please contact us for any questions or concerns you might have. I sure do hope to see you all in-person very soon. Until then, stay strong and healthy!


Emir Culov
Partner, Portfolio Management Director

Description of Metrics:

These metrics have been established based on guidance from the Center for Disease Control and Prevention, the World Health Organization, the U.S. Department of State, and other public health experts. For more information, read the NY Forward Book.

Metric #1—Decline in Total Hospitalizations.Region must show a sustained decline in the three-day rolling average of total net hospitalizations (the total number of people in the hospital each day) over the course of a 14-day period. Alternatively, regions can satisfy this metric if the daily net increase in total hospitalizations (measured on a 3-day rolling average) has never exceeded 15.

Metric #2—Decline in Deaths.Region must show a sustained decline in the three-day rolling average of daily hospital deaths over the course of a 14-day period. Alternatively, regions can satisfy this metric if the three-day rolling average of daily new hospital deaths has never exceeded 5.

Metric #3—New Hospitalizations.Region must experience fewer than 2 new hospitalizations per 100,000 residents, measured on a three-day rolling average. New hospitalizations include both new admissions and prior admissions subsequently confirmed as positive COVID cases.

Metric #4—Hospital Bed Capacity.Regions must have at least 30% of their hospital beds available.

Metric #5—ICU Bed Capacity.Regions must have at least 30% of their ICU beds available.

Metric #6—Diagnostic Testing Capacity.Average daily diagnostic testing over the past 7 days must be sufficient to conduct 30 tests per 1,000 residents per month.

Metric #7—Contact Tracing Capacity Number of contact tracers in each region must meet thresholds set by the Department of Health, in collaboration with the Johns Hopkins University School of Public Health and Vital Strategies.

US Map of the open and closed status by state and listing of types of establishments and services reopened, following the hyperlink there is the US Map, but there is also a good breakdown per state alphabetically listed and searchable listed below it.

Dear all,

I hope that with everything going on, everyone is still doing well and finding a way to keep your strength and positive attitude. As we get further into Spring, and the number of deaths caused by COVID-19 continues to climb, the realization of this disruption and the losses caused by it, are taking hold. The plans for reopening our economy are being balanced with the plans for safety that are supposed to have a long-term effect on how we live our lives as social beings we are programed to be. In the investors’ minds, the news reporting the effect of the lockdowns on our life and the economy, are weighted against the news about our progress towards effective cures and a vaccine.

Decline in demand, caused by this pause in social life, is proving devastating for some industries and especially hard for small businesses. The new unemployment projections (and we will know more about the real data tomorrow) are at a 23-24% range. Comparing this new level of unemployment with the 10% one experienced at the peak of the 2008 Financial Crisis is difficult (National Bureau of Economics Research). The question going forward is, what is the share of this unemployment number that will become our longer term “real” unemployed workers without jobs available to them, after the economy has reopened? As firms realize that the return back to the level of demand they had before the Coronavirus, looks further delayed, we continue to see more layoffs, salary cuts, dividend reductions/cancelations, and withdrawals of guidance in projected data.

So, today in May of 2020, it seems we have a tale of three separate economies: one where the large companies with massive balance sheets and products we continue to use without disruption are doing well, the second one where mainly smaller companies are dependent on the contact with us (the consumer), and the last one full of firms whose capital structure and future growth already had cracks showing even before the crisis, leaving them now completely defenseless and abandoned by the markets. However, we do believe that most of these factors have been priced in at this point. Positive news about increasing number of states reopening are being discounted by projections of how many people in those states will continue to stay away from contact with others, and not use services of the businesses that just reopened until their comfort level increases. The time is here to make some longer-term allocations for future performance of the portfolios.

Having an effective vaccine against the Coronavirus would, of course, make us all comfortable again. The only way, I believe, we can declare a definite win against the pandemic would be to have most of the world population vaccinated. Until then, life most likely will not fully return to normal. As this pandemic’s first wave slows in developed countries, it may start spiking in developing ones. The spread and the death toll there could be even larger because their health and crisis response systems, most likely, will not be able to handle the pressure.

Medicines like Remdesivir, (which is now being made by multiple companies as Gilead Sciences is sharing its formula with them) are being developed fast to reduce the loss of life caused by COVID-19. Antiviral plasma research is being approved for use with patients across many countries. In the race for the vaccine, Oxford University Medical Center seems to be furthest along, promising possible positive results and mass production for September this year. On top of it, due to the extreme focus of the governments on improving conditions and approval process for research, a new kind of immunization is being developed by scientists. Instead of introducing a dead or weakened form of the virus to our bodies to have it recognize and learn how to fight it, this new immunization does not require researchers to spend time growing large volumes of pathogens. These MRNA vaccines use genetic code to give our cells instructions for how to mount an effective immune response. They can probably be produced faster than traditional vaccines and also be adjusted for further mutations of the virus in the future (The Economist, April 25, 2020).

It is quite likely that these next couple or more decades become the age of biotech and health. A health crisis of these global proportions, and the common interest in solutions to fight it, is making one striving to be a scientist as cool now as the coders were in the beginnings of the age of software and communication. That might be the big positive we should be looking at. It could be possible that we not only get the vaccine for this virus and become ready with our response for the next one, but also that we solve other diseases that cause huge costs to our society and annually claim as many lives as COVID-19 does now.

My instinct in these big downturns is to be tactically contrarian. To buy what is hated right now and build satellites around our core portfolios. Some industries, like oil and traditional retail are outside my comfort zone to be adding to for additional future performance. The first one’s politics are too messy for me with its future necessity to society diminishing, and the second is almost not being used by my family and others I know, so why hope that dinosaurs can survive the storm. Dislocation on this scale will likely take out the weaker players in every industry. The best ones are emerging even stronger. The S&P is America’s core capital stock, and most of it will survive. Yes, big tech is back up, but others in different industries are on sale. I believe we will all start to fly, stay in hotels and go to restaurants and bars again. I keep that in mind as these days are making me queasy from time to time. I am not complaining. Today’s reality has a light at the end of the tunnel. This is the game I have chosen to be in.

All my best to all of you…

Emir Culov
Partner, Portfolio Management Director

Dear all,

At CWM, we mark the 10th week of working through the Coronavirus Pandemic. We have initiated a crisis management process as early as last week of February. It has been, and still is, a very interesting time to watch us test our communication, our process, technical expertise, and contingency plans. Examining our experience in the management of a business, client and employee expectations and feelings, and our investment discipline is a good way of making our team stronger over time, and even readier for the future. Being that it is week 10, I went back to my notes on macroeconomic response that would be needed to make the resulting recession as short as possible. Looking over the notes, I decided it might be a good idea to share some of it with you.

Over time I have found that being measured and centric allows for enough liberalism to adjust our traditions and principals with the progress of humanity, but that the correct amount of conservativism is necessary to maintain stability and prevent painful, even violent, revolutions. I am a staunch defender of Liberal Democracy and Capitalism. I believe until someone proves that there is a socio-economic system that can provide more protection, equality, and potential for a better future to every individual, we should all be careful to protect the ideas that made US the place the world still looks up to. Being an immigrant myself, my favorite line of one of the Founding Fathers is from Thomas Jefferson, and it goes: “… and possessed a right, which nature has given to all men, of departing from the country in which chance, not choice has placed them, of going in quest of new habitations, and of there establishing new societies, under such laws and regulations as to them shall seem most likely to promote public happiness.”

All actions suggested here are rooted in economic theory and practice. They are not meant to be a critique of the former, nor the current leadership. Leadership in crisis is hard and hopefully some good future leaders are earning their stripes in this one.

Let us first start with economic policy prior to the arrival of the new Coronavirus onto our shores. It helps put our current situation in perspective. An additional spending package (mainly infrastructure package) could have possibly been used even with additional spending and budget increases. Theoretically, it would have helped to bring us to full employment/maximum output earlier and would have helped the Fed to ready its positioning for the next recession.

In my opinion, education and health care investments take a very long time to bring about recovery. Other, faster employing infrastructure investments could have been additionally chosen for allocation of the funds. Large amounts of TARP money ended up sitting in bank accounts and not being used because it went into not-spending hands (banks held it as a reserve, and the wealthy have not spent it on things that recover the economy). Extended unemployment benefits, by economics, are not really inducive to rising output by consumers and businesses. Large amounts of the funds spent were structured by tax cuts and tax benefits. Keynes’ theory proposed that taxes could be used for redistribution, allowing an increased propensity to consume, and that taxes could also represent a way of corporate savings by paying down national debt and in that way slow the economy if needed. So, if his theories are used, they should be closely followed through the economic cycle.

Introduction of corporate tax-cuts at the moment that the economy was nearing full employment was troubling when we were told by most of the corporate bosses that they will be using the majority of the windfall towards massive buy-backs of their stocks. Remember, stock buybacks can create the slow (mattress) money that investors do not spend immediately, so economic growth does not get a real push. Some of the companies on the verge of needing to be saved right now, seriously shrunk their balance sheets over the last few years by these buyback operations. This left them exposed to the risk of lost revenue in crisis, forcing them to cut dividends, or borrow in order to protect them.

So, given that some of these recession fighting tools have already been used, leaving us partially handcuffed in the fight for the full economic recovery, let’s list what should be possible.

A Keynesian response of massive proportions might be needed again. Its priority should be leaning toward stimulating purchasing power and supporting working income. Promotion of full employment and maximum output could be pursued as long as inflation does not become a major threat. In order to keep it at bay, supply chains could be maintained and consumer demands fulfilled, even if emergency powers need to be used. Massive spending could bring inflation in the future, but first we have to make sure there is no deflation and that there is a stable positive growth. Tightening policy tools and reductions in government size and budget can be used latter if there are signs of high inflation returning.

Direct income support for working Americans, economists would say, is needed to replace their lost working income. However, it is unnecessary to provide this through multiple channels and at the levels that would benefit workers staying home rather than going back to work as soon as work becomes available. For example, handing out one-time fixed amount checks to every tax-paying American has been proven to be unsuccessful in stimulating demand (turn to Milton Friedman on this one). It was tried by prior administrations before, and it did not have the planned results. People do not spend the money unless they feel their future income is stable and growing over the long run. Also, increasing the amount of unemployment benefits, while at the same time providing forgivable loans for payroll purposes only is not necessary. The first action, in some cases is providing more than the actual income workers were receiving while working, which usually is counter-productive to the efforts of getting people to return to work. The second action is placing limitations on small firms’ flexibility, possibly damaging the free market capitalism economy where flexibility is required. The government could instead become a guarantee in crediting small businesses where that makes sense. This might be an opportunity to do some long-term good by introducing a version of basic income for those at the highest risk in a shrinking economy, and by providing a slight increase in the minimum wage, including the basic health care for those without availability of one, or the means to pay. Understandably, these could be considerably basic benefits that should not undercut the incentive to work. These actions are usually recommended to be immediate with funding allocated and available with an efficient distribution system in operation.

Public works could be coordinated with partial relaxation of the quarantine protocols and reopening of some industries to create a near-term increase in growth of output. Investment in infrastructure might be the correct answer here. These projects can provide stable and longer-term employment for people who could be losing their current jobs. Public transport will need to be able to function with allowing social distancing anyway, so why not expand and refit our airports, harbors, and city public transport systems to allow us to catch-up with other developed economies in the quality of our transportation. This could include improvements and additions to current highway systems with electrification expansion to allow for the faster growth in usage and production of electric cars. I believe our electric grids are old, vulnerable to cyber and physical attacks, and unstable. The investment here seems needed anyway, so faster may be better. Further, we could establish a goal of being the most connected nation on Earth. In order to maintain our supremacy, we could develop a network of mobile and wired networks with the highest speed and quality connecting every business, educational institution, household, and every American. Our health care system needs improvement, in order to be ready for the next Pandemic, minding gaps in coordination we are experiencing now. Here, I believe communication and leadership for the health care system should be developed for emergency responses in the future. These investments do not have to be funded immediately but should be announced and paid for overtime as 3, 5, and 10-year projects.

Next, there could be monetary policy lowering interest rates, providing liquidity through loan availability, reestablishing stability in the markets through purchases of long-term investment vehicles, shoring up of money market funds, and protecting dollar from the international pressure by creating availability to other central banks, so that they can provide dollar lending to their economies when needed. This time around, I believe the Fed has done all of this at an amazingly fast pace. Acting with purpose and determination, while providing further forward guidance, might be about all the Fed can do at this time without lowering the rates to negative territory and charging banks for keeping their reserves uninvested.

In my opinion, additional tax-cuts would be beneficial, but only targeted at those cuts that would benefit the increase in output. Temporary relief on sales tax (which most likely would hurt state revenues and could be replaced by parts of the relief program) could induce consumers to spend more on non-essential items and provide some relief to discretionary sector. More importantly, tax progressivity could be improved further and for the longer time, knowing that those with lower incomes do move dollars from hand to hand faster. Some balancing of stock buyback restrictions with possible tax benefits in relation with promoting better conditions for workers and investment in their future, while giving them a share of seats in the board room, could be introduced.

Lastly, financial support could be needed for the states that are coordinating and paying for the virus fighting efforts, while at the same time losing revenues and seriously damaging their budgets. Federal government would need to provide funds (through loans, grants, and direct investment) for further development of health care systems, research, and preparedness programs through universities, biotech firms, state response systems, city waste management and hygiene programs, and so on. This virus seems to be here to stay, and until we have the effective vaccine, we should act like we are in a pandemic fighting mode, while further preparing for a possibility of similar risks to humanity in the future.

It is hard to determine the actual size of the recovery package needed to accomplish all the above tasks. One way would be to pass everything that seems to be needed now (workers’ pay replacement, states lost revenues, and business credit) and provide the verbiage for the future payments announced in the package. I believe this open-ended commitment would be massive but would be more flexible than what we had last time in the Financial Crisis with missed opportunities and a prolonged recovery.

These remedies could be an answer to structural problems in the economy and possibly could deliver us a better future system as a part of the recovery by addressing the areas of infrastructure which are impeding our productivity, security and growth, while also addressing a serious wealth gap and easing the suffering of the low-income and minority workers who suffer the most when the unemployment rises.

With some of the early response kicking in, the market seems to be fighting back in a V-shaped recovery, while the economy looks like it might take a more traditional U-shape path. There will likely be a lot of negative, bad data coming over the quarter, all things fully expected. The investors’ focus now should be on the virus spread containment, speed of getting an effective vaccine, medicine for symptoms, and rehabilitation of some parts of the economy, so that the output starts turning around.

Please feel free to send me your thoughts and comments any time. Stay well and strong!


Emir Culov
Partner, Portfolio Management Director

Dear all,

In early 2008, Yngve Slyngstad was the newly named boss of Norges Bank Investment Management, the famous Norwegian sovereign wealth fund, charged with managing the assets accumulating from the sales of the country’s vast oil reserves in the North Sea. His assignment was expansion of the fund’s portfolio into equity investing (until then all the money of the fund was invested in bonds) and setting it up for long-term performance with goals of supporting the government’s budget with a steady contribution. In principle, investors with a long horizon should tilt towards riskier assets. This is one of the basic principles in investing, but even the best principles can be hard to follow.

During 2008, the fund expanded its share of equity to 60%. The timing could not be worse. Global stock markets crashed and reached its bottom in October. A rally in the safe bonds, that the fund held, helped with limiting the damage to a loss of 23%, but that did not help with the complaints and protests of Norwegian population and politicians. At that point, the principals of investing (here we go again) called for rebalancing. The next step was selling off the bonds that had gone up in value, to buy shares of equities that had become cheaper until the level of 60% in equities was reached again. It takes some guts to buy the assets everyone is running from. Some funds suspended their rebalancing rules at the time. I still remember this well. On top of this, Slyngstad had the politicians and the central bank coming after him. If the stock market did not survive there would be a reckoning and a price to pay for all of them. The fund spent $175 bn on purchasing equities in that rebalance. That was 0.5% of the whole market. This move set-up Norway for a powerful 10-yr bull market that followed and allowed for the current discussion of basic income for every Norwegian citizen. Rebalancing is now hard-wired into the NBIM process and enforced by the Norwegian Ministry of Finance.

Just like the great financial crisis of 2008, this one, different in causation and factors of recession, has initiated a bear market in investment asset values. We are now past the first phase of this bear, moving slowly through the second stage. Caution and patience are needed, but so is the discipline with our investment principles. All accounts we manage have a long horizon. True, not long-term in the sense of the sovereign wealth or pension funds, which allow for true risk taking at these moments in time. In that long-run we are all dead. But we all have personal long horizons, 10 years and longer, with a job of providing for the income and other scheduled liabilities over that period and into the future, through trusts and estates.

Rebalancing portfolios is a little different between growth and income-focused investors. Growth-seeking investors are rebalancing now from better performing large-capitalization equities and some bonds, into midsize and small-capitalization equities, which have underperformed, as usual, so far in this bear market. Being cautious, they should not surpass their upper limits on percentage of assets held in these types of investments.

Income investors should be rebalancing in order to improve positioning by increasing equity in the portfolio from bond holdings, while at the same time trying to be picky about which sectors will the dividends from those equities come from, how stable they will be in the economy that emerges out of all of this, and increasing overall dividends by buying at low prices. Again, if you are currently using dividends from your accounts, please continue to do so. We would rather that you keep your schedule as close to our planning as possible without damaging your safety reserves in the bank or here. All the dividends that are not being used should be reinvested, buying assets at these lower prices.

Continuing to harvest some losses for all non-qualified accounts to improve after-tax performance and offset future gain declarations in the mutual funds is another good investment principle that should be used now.

I know the times are hard, and it is painful to look at our accounts and online reports while not being able to get out of the house. However, please remember that we are going through a very volatile period. Values are changing daily by very large numbers and, since we are not selling all of our holdings at this time, this daily value does not matter that much. The solutions to the reason for this crisis and recession will come at some point, the world will “reopen” again in stages and we have to believe that the economy and the markets will still be there and growing, even without some industries and companies that will not be needed in our adjusted future.

Stay safe, careful and disciplined, while also staying positive and strong!

We are here for you and happy to have conversations about your specific issues and concerns at any time. Please remember to contact us if your appointment needs to be rescheduled for any reason.

All our best!

Emir Culov
Partner, Portfolio Management Director

Dear all,

What is the historical shape of a bear market? Does that historical, expected shape has anything to do with what we are experiencing, and may be expecting this time around?

The average length of the 13 bear markets since 1929 is 20 months with an average drop of 38.9% from the peak to its bottom (Wells Fargo Investment Institute). There are three phases in a typical bear market. The first one is a significant drop in prices due to the initial shock, too many unknowns, and the liquidity scare with run on the banks and move to safe assets. The second phase is a long sideways movement where markets are retesting their lows and finding the true bottom. The third, and final phase, is a sustained rebound as investors process the real information and get a clearer outlook causing them to look into valuations and seek mispriced assets, finally bringing things back to equilibrium.

Causes for these historical bear markets were different, but somehow the path the investors took were very similar. I believe a big part of this has to do with our psychology and the way we deal with any problems in our path. New reality has a lot of unknowns that we need answers for first. New reality causes us to examine our beliefs of how our future will look. Through this cycle, problem(s) have to be identified, analyzed, and only then, fixed. We are most possibly in the second phase of this Coronavirus-caused bear now.

This week one of our clients asked me: “Why is the market so optimistic when all the news are so bad?”. True, unemployment numbers are higher than expected, earnings estimates are revised further down, and it does not look like the “reopen” will be as early as some thought, nor that we will just go back to life as it was. Yet, for some days now, markets turn red as the bad news come out, and then turn positive as the trading continues. This is especially true for the NASDQ index, because the majority of the companies listed on it are technology and modern economy related, which have been less affected by the shut downs and to a large extent, necessary for our adjusted lifestyle to continue.

I believe that there are two reasons for this optimism. The first one is that, this time around, our central bank reacted with expedience, confidence and determination. Investors learned over many years that it is not a good strategy to fight the Fed, so most of them are making their decisions with the Fed’s actions in mind. Because of the improved liquidity available from these actions, I believe we probably had our bottom already on March 23rd, and even though the markets will probably test this level multiple times, we might stay above it unless some completely new negative information about the Corona virus emerges. The second reason is even more important (partially caused by the first one), and it is an answer to the question “What to do with the funds available?” Cash and gold don’t pay the rent. As a matter of fact, there is a cost associated with holding them. Treasuries pay very, very little. The rent from the money invested in treasuries will not get anyone far. Pension funds, insurance companies, retirees, and investment firms have future liabilities they will have to provide for. All of their assets have to earn to provide for those future payments.

It is my opinion that a well-diversified portfolio, one which includes equities, still provides the best solution for most of these investors.

Please call me with any questions or concerns related to your specific allocations and accounts. Our office remains open for virtual/video meetings until restrictions are lifted. Our contingency work schedule continues with Amela, Matt and myself working from the Stonehouse, separated in our offices, Monday through Friday, while our hard-working staff is rotating their work week, covering the usual workload from their homes as well. We will be informing you about any changes as we continue on our path towards slowing the spread of the virus and the eventual reopen.


Emir Culov
Partner, Portfolio Management Director

Dear all,

Another week of Corona-fighting reality, another letter… We are getting into the rhythm here. Looking at the cycle from starting the stay-at-home orders to easing them and opening the cities, it looks like it took about 17 weeks for China and South Korea. So, from that prospective, we should be approaching the half-way point by the end of the next week. But, since this country is full of problem fixers, with improved communication, sharing of the data, and citizens following the guidelines, we are hearing a lot of optimism this week.

This month brings us some new catalysts influencing investors’ actions. Negative catalysts are focused on contracting economic data. Results from a tough first quarter earnings season, double-digit unemployment numbers hitting us weekly, and painful projections on the loss of the earnings for the second quarter. Positive catalysts will center around better-than-expected results from social distancing, defining the peaks of the curve and potential for late-April decline in the growth of infections, possible announcements of reopening schedules for some segments of the country and the economy, and doubling-down on the Fed’s actions to make sure they fight off any possibility of a depression.

During this week we continued with our rebalances on the accounts. There was more tax-loss harvesting and repositioning, but also buying from cash on our moderate and growth models. Even though we might not know real earnings numbers until a week from now, and more down days could be ahead of us, we feel that in the long term, employing some of the funds available at A bottom is better than trying to guess where THE bottom is. The reversal in investor positioning has already happened earlier. Substantial deleveraging has taken place, yet we do see first results of emergency actions of the Fed producing results. The most recovered markets tend to be those in which central banks now buy or will be buying assets in a big way.

Big banks projections for negative earnings differ and it ranges from high teens to a whopping negative 35% projection by Goldman Sachs. At these prices, equity market being about 27% up from the bottom of March 23, stocks still seam expensive if we base our calculations on the earnings expectations for this quarter only. We believe that the future earnings and projections for different industries and sectors will be driving the stock prices going forward, but it might take some time to get back to our former highs. Sitting on the sideline could be the wrong strategy for investors needing stable income for a long time in the future. With diminishing liquidity concerns over this quarter, income investors would possibly do best to continue rebalancing and do some careful repositioning to continue to generate dividends, using opportunities to raise them where possible, and keep on reinvesting the unused income while the prices are low.

Please continue to follow government’s guidelines in this fight. Keep your family and yourself safe and healthy. Stay positive! That is very important at hard times. Remember to thank those that are putting them selves at risk to help all of us… nurses, doctors, first responders, grocery clerks, pharmacists, drivers and others who are finding ways to help their communities.

We are here for you. Our scheduled meetings are still being held, although over the phone or via FaceTime. We are thankful for all the planning we have done with our partners to make sure we have the best technology and contingency plans for situations like this (never actually planned for the pandemic, but the plans got a little adjusted).

Allie and Mary are talking to some of you regarding the cancelations of your scheduled required minimum distributions from IRA accounts. It only seems reasonable to hold back these distributions, in order to minimize the taxable income for 2020. Further, the dividend not taken gets reinvested, buying the new shares at discounted prices. Please be responsive with any actions needed. Keep in mind that any distributions not needed for living income that are canceled for this year will have to be reinstated for 2021. We have to be organized and stay on top of all the necessary steps.

Stay strong and disciplined!


Emir Culov
Partner, Portfolio Management Director

Dear all,

March 2020 has passed… Good riddance! Other than families and communities coming “closer” together, a birthday, even though without the usual party, and the coming of the spring, little else was good about it.

The crisis is not over yet. The panic about it is probably at the peak now. Virus is still spreading through the world. Some regions that already got hit hard are worried about the possibility of a second wave. Chances are, hospitals in large American cities will be overwhelmed, just like the ones in NYC are now. However, it looks like government coordination is getting better, and the communication of a fairly uniform message to the communities is finally getting out there. The coordination between drug producers, research universities, testing-lab companies, and other bio-tech companies is growing, with dozens of existing and new medicines being currently tested for the effectiveness and safety in use with patients with COVID-19. We see more videos of Chinese population posting their new reality of life after Corona peak. Keeping your distance and wearing masks is a new social norm as they are getting back to work, shopping and meeting their friends.

Our economy is hit hard, and punches are still coming. What is unique about this time (there is something unique every time), is that we are purposely trying to stop a large part of our economy to save lives, while at the same time providing a bridge of Federal funding to get those parts of the economy over the ravine caused by the pause. It could work. Our economy was in excellent condition going into this virus crisis. That gives us a great start. Our Fed’s actions were early, resolute and massive. The Government was a little behind, but the package should be able to help smaller businesses and get some money into consumers’ hands fast. It will take few weeks for the liquidity to get into the system, however, it looks like the desired effect is being seen in the financial system. Some industries could possibly take a very long time to recover. Some of them, like traditional retail, were struggling in the new economy anyway. This crisis might be the hit to take it over the point of no return, where some companies that were a part of our life will no longer be there.

All of you who are still running your own businesses should be familiarizing yourself with the PPP loans that have forgivable options and have a subsidized low rate that will be available through all SBA certified banks starting tomorrow.

All of you who reached the requirement for Required Minimum Distribution from your retirement assets, or were already taking it before, will not have to take it for this year. The relief package is including a provision that waives the RMD for 2020, and also may allow withdrawals from retirement accounts without a tax penalty if funds are needed for living expenses in 2020. Please see the attached PDF “Key IRA Impacts of the 2020 CARES ACT” for full details. We do not recommend using retirement assets before retirement unless it becomes absolutely necessary, in which case the decisions should be made in consultation with a CPA.

Your 1st quarter-end statements will be on the way to you. I know how hard it will be to open that envelope and look at the dollar number drop in value of your family’s long-term savings. Most of you have never experienced negative month-end results like this before, but you have to remind yourself that this is a value at this specific time. You still own the assets for which the true value should be accounted for again after the crisis is over. Any time you feel that having a conversation about your specific situation and your plan could be helpful, please reach out to us. We are here and working every day for you.

In the meantime, as you can see from the never-stopping trade confirmations being mailed to you, it has been a very busy time for us to do what we should be doing for you at this time. Rebalancing is what we have to be focused on and active with during these volatile periods. This is not simply just finding tax opportunities by realizing losses on some positions that can offset gains, but also improving positioning to allow us to move forward as volatility starts to subside. In addition, we need to keep our portfolios in a balance as they are hit with the large changes in valuations. We are closely monitoring our scheduled distributions and are still not going in with all the cash available, nor all of the new dollars that some of you have sent us recently. We continue to employ dollar-cost-averaging to buy opportune times in this volatility.

We will continue to reach out to you either through these weekly letters, or by contacting you about specific information that could pertain to you or a small group of other clients. If there is anything we can help with, to you or yours in these hard times, please let us know. We will do our best to be there for you.


Emir Culov
Partner, Portfolio Management Director

Dear all,

The impact of the new coronavirus is proving to be much larger than most people expected. The toll on the economic activity in US will be historic. Economic activity reports for March, April and May are expected to put a large, negative number on possibly the biggest quarterly drop in GDP, which is what is driving the selloffs in the market. Additionally, unemployment numbers could climb really fast towards a number not seen since the 2008 financial crisis. Even with the help of the financial stimulus, household income will drop significantly and overall consumption will decline. Small and midsize businesses, and even some large businesses in industries most affected by the fight against the virus, may be hit hard despite the available cheap credit (loans) and tax breaks available, because the consumer will have to stay away for a while.

I do not think this is like 2008, or like 2001. I do feel it is only natural that we are all trying to ascertain what is going on around us by comparing it to our previous experiences, however, this is just not it. In 2001 we returned to work and continued to live our lives quickly, with only adjusting to the new reality of the global terrorism treat. To the global financial system, 2008 was just the opposite of what is going on now. At that time, banks were the problem. With the large amounts of bad assets poisoning their balance sheets, they were not able to do their job in the economy and provide for the growth of other industries. Today, bank balance sheets are very strong. The risk is that the disappearing demand to businesses is going to “infect” the financial system with missing payments and debt that will turn bad over time.

However, markets are continuing to function under pressure and, are doing so without traders on the floor of the NYSE. This is not mentioned enough. Even with the panic selling continuing to make new days of record point losses and gains, all of the trades get placed in an orderly fashion.

Monetary and fiscal stimuli, which were just announced, are bigger than what was seen before. Luckily, we have a precedent set in 2008 so that the things can move faster. The Fed is obviously at “whatever it takes” mode and is daily increasing its support and monitoring of the liquidity needed for everything in the financial system to function. Our government is a little slower, but we now have the response required and hopefully it will be able to make the planned effect on the economy fast. The central bank of the future is no longer there only to help employment and manage inflation. High inflation may be gone for a while. Providing support to the financial system at times of great shocks to prevent depressions is requiring some new tools that are being developed in these hard days.

Understandably, controlling the virus means slowing our economy. The right balance is hard to strike. I do believe that over a short period of time we will be able to find it and start managing to get out of this stronger. Stay positive by remembering that all this is not caused by excesses in economy. We were healthy and strong. With the virus fears diminished, healthy businesses will be thriving. We believe that active approach to managing portfolios is back and it will be more appreciated than it was in the last ten years. It will be harder for the savers in the future, so our focus on creatively managing income will become even more important.

Stay safe, follow the rules to help the fight, and be there for your loved ones and your community. We are here for you as always.

All the best,

Emir Culov
Partner, Portfolio Management Director

Dear CWM families,

This is our fourth special communication in as many weeks. As far as I know, all of you are healthy and many are adjusting their plans and lives to this new, and hopefully, very temporary reality.

Our political and business leadership is effectively shutting down part of the economy for a month or two, and we believe that is the right thing to do. Many have said that only draconian regimes will be able to introduce measures necessary for effective social distancing, but here we are, in a developed democracy, all doing our part to help minimize the health crisis and give health professionals some valuable time to do their job. Come to think about how we changed our daily routines, I don’t think there was ever a time you could not watch a decent sport event on TV at any time in the last 20 years. From those simple pleasures to how we do our jobs, how our kids learn (and what will they do at home for so long), and to how we do Easter and travel, our lives are temporarily changed.

The U.S. Fed has taken very large steps to keep the liquidity protected and market working efficiently. However, low interest rates and high liquidity cannot replace lost earnings of companies, nor can they help with keeping all employees on the payroll. That is why the fiscal stimulus is important, and an effective package is expected from the government. It is hard not to think that a global recession is unavoidable now. How deep and how long will it be will depend on the response to this global crisis.

Not all the sectors and companies should have large losses of earnings. Most of the family monthly spending is related to things like food, rent (mortgage), insurance, tuition, utilities, healthcare and other things that will continue to be consumed. Fiscal stimulus should not be needed for providers of those goods and services; however, focus on airlines, travel, entertainment, restaurants and similar industries may be necessary.

Understandably, controlling the virus means slowing our economy. The right balance is hard to strike. I do believe that over a short period of time we will be able to find it and start managing to get out of this stronger. Stay positive by remembering that all this is not caused by excesses in economy. We were healthy and strong. With the virus fears diminished, healthy businesses will be thriving. We believe that active approach to managing portfolios is back and it will be more appreciated than it was in the last ten years. It will be harder for the savers in the future, so our focus on creatively managing income will become even more important.

Our accounts have been affected. Stress is extreme and it could be longer than some think. There is no doubt that your plans we built over years are being put to a test. Please remember that your accounts are allocated based on those plans with your risk tolerance and future needs for funds at the center of planning. If you are currently using distributions from your accounts as a part of your income, please continue to do so without change. We are not experiencing cuts in dividend distributions at this time. However, large, unplanned liquidations could potentially reduce dividends you are receiving and also have you potentially miss the positive days in the market that someday in the future will be marked as the steps that got our averages back to the previous highs. Let’s make sure we are discussing mortgages some of you may have and possibilities for refinancing at these unexpectedly low rates at our future review meetings. Also, please consult with your CPAs regarding the newly possible option to delay your tax filing and discuss any possible taxpayer benefits to you.

At this time, I would also like to extend part of the services we provide to you, to your family and friends who might feel concerned about their savings and retirement. If you hear some of them expressing stress and concern, or if they feel that they are not communicating enough with their advisors, please provide them with our phone number and email and let us know if you need us to reach out to them.

Please stay safe and take care of yourself and your loved ones. It will be hard for me not seeing you here at the Stonehouse for our meetings for a month or so, but thankfully, technology allows us to keep our schedule and keep on being in touch until we beat this pandemic. We are here for you as always. Please don’t hesitate to reach out to us if there is anything that you think we can help with.

Emir Culov
Partner, Portfolio Management Director

Dear all,

As I am writing this note, I am imagining you listening to the news, reading todays papers, and checking your accounts. I am not going to say that you should not be concerned. The new Corona virus is presenting a serious health risk to the world and to the communities we live in. Hopefully, officials will be stepping in and introducing all the necessary measures needed to mitigate the risks associated with this health threat.

Today’s stock market movement is most possibly initiated by Saudi Arabia’s decision finalized yesterday to escalate its clash with Russia, which refused to agree on the levels of supply controls that were for a long time now being used to set and manage oil prices. The decrease in the crude oil price added to the last two weeks of turmoil made all investors very concerned about economic growth staling. Normally, low energy prices and extremely low interest rates would be an incentive to the consumer. The spending would continue and prevent us from going into the recession. But, because of the fear of the virus, consumers might stay home a few weeks and not use the full benefit of this unexpected stimulus. We are still concerned about interruptions in supply and the effect this could have on corporate earnings.

Due to all these risks and the large number of possible outcomes, we have previously increased our cash positions and improved the liquidity of our models as we have already informed you. Since our last notification, we have rebalanced the accounts once, as per our process, to take advantage of the lower prices in the positions we like, and aiming to improve overall dividends. We will possibly be rebalancing again, so don’t be surprised to see more trade notifications in your inbox or mail. For all of you who are currently contributing to retirement plans and have systematic investments set up on your accounts with us, please continue your contributions as they are, or even increase them if your budget allows you to. Dollar-cost-averaging and rebalancing are some of the best ways to benefit from the market volatility in the long-run. We will keep calm and carry on with managing our plans as per our pre-determined discipline while monitoring liquidity issues and possible government and Fed actions.

Please call me if you feel you need to speak to me.

Emir Culov
Partner, Portfolio Management Director

There is no guarantee that dividend-paying stocks will return more than the overall stock market. Dividends are not guaranteed and are subject to change or elimination.

Dear all,

In light of the declaration of the COVID-19 pandemic by the World Health Organization yesterday, and in order to support the effort of the authorities to minimize social contact, we are changing all our in-person appointments with you to teleconference meetings over the next 4 weeks, starting Monday, March 16, 2020. All appointments will be held at their prescheduled dates and times. We will be calling you at your preferred phone number for the meeting. Any documents needed for your review will be mailed or emailed to you prior to the scheduled meeting.

I hope you will understand and support our decision. As always, we are here and are working for you. Please call us with any questions or comments you may have.

Thank you,

Amela Culov
Partner, Family Wealth Advisor

Dear all,

This is to inform you that we have taken the necessary steps to de-risk our investment models today.

We are adjusting portfolios tactically towards our recession-ready positioning. This is not because we think that the recession is imminent, but because we are concerned about corporate earnings. If you remember from my letter in January, we said that the risk of recession is coming from a supply side this time, which was weakened through trade wars of the last two years and now is severely disrupted by the coronavirus spread. In our view, market valuations were dependent on healthy consumer spending and corporate earning maintaining their projected levels. We now recognize that a chance of a pandemic could potentially have a large impact on the projected earnings throughout majority of the sectors and cause significant adjustments in the valuations of equities. Bonds may be seeing inflows lowering the interest rates further into uncharted territory for the U.S. economy. We believe at those interest rate levels bonds do not look like the best place to be over the intermediate run. Our portfolios will continue to be diversified with tactically increased amounts of cash and cash-like positions over the short-term.

I am including a short article related to the virus issue (and analyzing previous global virus scares) by the chief economist of the First Trust. Please read it and continue to follow market commentary from Wells Fargo Advisors, which is available in a link from our website.

As always, please do not hesitate to call us with questions and concerns.

Emir Culov
Partner, Portfolio Management Director

Wells Fargo Advisors did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.

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