March 16, 2020
Rising fears of the spread of the coronavirus, together with plunging oil markets, have global markets moving at an unprecedented pace and magnitude. Stocks have reached bear market territory while interest rates have reached historic lows. And while each bear market presents its own challenges, this one has been particularly unpleasant. However, markets have proven resilient over the long-term, and our best advice is to stay the course, review your investment goals and make sure your portfolio continues to align with stated goals over the long-term.
Over the last several weeks, capital markets have largely functioned as expected in a time of drastically changed market sentiment. With the ascent of trading volume and volatility, we’ve been seeing the cost of liquidity rise as well. This is to be expected, as we are not in an orderly market environment; conditions have changed. Despite the enhanced volatility, market action has generally been orderly and functioned in a decent manner both in the ETF market in general, and in our ETFs in particular. As we have been counseling investors for years, we recommend using limit orders and avoiding trading in the first and last 15 minutes of the trading day. Volatile markets often mean wider-than-normal bid/ask spreads across all asset classes—particularly at the open and the close—which in turn mean wider-than-normal spreads in ETFs comprised of those portfolio holdings.
We’ve been in a persistently low rate environment for quite some time, and we believe income starved investors will continue to be challenged finding meaningful levels of income, particularly with regards to traditional stock and bond investments. It’s our view that income investors will need to consider a broader opportunity set, including diversifying with non-traditional income sources that have exhibited lower correlations, while maintaining an awareness of the risk/return trade-offs.
Virtus ETFs will continue to be here for you to discuss market conditions and the impact of recent volatility on specific investment strategies. Please reach out to get our views and insights and engage with our tools and resources to help you through these challenging times.
The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.