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The Long Road to Recovery: Highlights from the Evercore Wealth Management Investment Webinar

Recent gains in the markets provide a real opportunity to re-assess wealth plans to make sure they reflect individual needs and risk tolerance. That was the view at the Evercore Wealth Management Webinar, The Long Road to Recovery, on April 16, 2020. CEO Chris Zander moderated a panel led by Chief Investment Officer John Apruzzese and included Partners and Portfolio Managers Tim Evnin and Brian Pollak.
 
Other highlights included:

• Unprecedented market volatility over the past few weeks have brought the equity markets back to where they were in the middle of last year. Evercore Wealth Management portfolios were stressed, but for the most part did not exceed our modeled maximum drawdown for balanced accounts and we helped our clients remain calm.
• The path forward hinges on a combination of testing, therapeutics and vaccines. A third of the U.S economy is closed, 22 million unemployment claims have been filed, and GDP has fallen in the range of 25 to 50%. All of this bad news is set against the massive stimulus of the CARES Act and the trillions of dollars the Federal Reserve is employing to support individuals, companies, municipalities, and the credit markets. The equity markets’ recent run appears to be in part a reflection of investor optimism that our economy will enter the recovery phase in the near term. Our assumption is the many efforts to address the Covid-19 challenges at the therapeutic level will eventually result in success and the economy will recover.
• The recent gains also reflect the heavy weighting of the five Big Tech companies in the S&P 500 index, which together account for almost 20% of the index and make it an imperfect reflection of the overall economy.
• In the growth portion of clients’ portfolios, the focus has been on upgrading quality and durability. Entering the recent period of extreme volatility, our investment team revisited the existing portfolio to test each company’s ability to withstand the downturn. In parallel, the team sought to find opportunity to invest in high-quality companies that became mispriced. The result was several changes – the removal of three companies judged to be at risk and the addition of two that we believe will weather the challenge. The team also added to existing positions that appeared to have been overly punished in the sell-off.
• Defensive assets – primarily municipal bonds – were also quite volatile in the quarter but regained their market value after the panic selling. We remain comfortable that these assets in client portfolios are indeed defensive and don’t present default risk even if there is risk of ratings downgrades. Municipal bond portfolios remain a valuable ballast to equity exposure. In the more credit sensitive areas of fixed income, the team is looking to increase exposure selectively in both the liquid and illiquid markets. While the liquid parts of the market have rallied substantially, opportunities remain in illiquid stressed and distressed credit.

As we move into the next phase of the Covid-19-driven economic crisis, there remains considerable uncertainty and there will likely be additional volatility. Having a wealth plan in place and sticking to that plan through the volatility remains the best approach to long-term financial well-being. This is an excellent opportunity to revisit that plan to ensure that it accurately reflects income needs, risk tolerance and estate planning strategies.
 
Please contact us for further information or to discuss your individual and family wealth plans.