Navigating the COVID-19 crisis is at the top of everyone’s mind, particularly as it pertains to the health of the economy. With that in mind, we sat down with HCR Wealth Advisors and discussed how the financial advisory firm is handling the pandemic and how they view the post-pandemic financial landscape.
What plans, both short and long term, does HCR Wealth Advisors have in place during this particular crisis?
It is not easy to answer that question with great specificity because each client has different risk tolerances, different portfolios, and different financial needs and goals. Broadly speaking, what we have done for our clients, regardless of what their personal risk tolerances and investment objectives are, is we have moved to the lower end of their respective risk spectrums. Also, in order to minimize volatility and help our clients ride things out during this period, we have done what we can to get more conservative in the portfolios. When we think that we have seen signs that the dust is starting to settle, then we plan on adding back to the growth side of the equation.
If we are successful in our goal, we hope that it will manage or limit declines in individual portfolios during this period. We know from experience that when we start to allocate back to growth on the other side of this, we should be able to make back those declines in a relatively short amount of time.
Economists predict that if we do not go back to work by early May, there will be a real depression. What happens to the portfolios of HCR Wealth Advisors if the economy faces such predictions?
The government has allocated a couple trillion dollars to support the economy and businesses. Given the unprecedented amount of support that the government is willing to provide during this situation, it demonstrates that there really is not a limit to how much it will provide to avoid another depression. To answer the second part, if this was going to be much deeper and longer than we anticipated, we would continue to make additional moves to get even more defensive and insulated, which would enable our clients to ride it out for a longer period of time.
How much longer can people go without working and the economy is stopped before going back to work? When do you assess things could begin to get really bad?
Right now, the governments are looking at getting people back to work in stages. There may be some parts of the economy that never get back to normal, but there are companies that are still operating during this crisis. Furthermore, even if we get back to work in stages, markets will be able to figure out, or at least try to quantify, what this kind of new paradigm looks like. This would enable it to be better at pricing things in.
In these times of uncertainty when we are not sure how things will unfold; the inclination is to stay put and wait it out. What is your view?
The markets are not fond of periods of uncertainty. Nobody really knew what was going on or how long was it going to last in the beginning stages of this. That is one of the reasons why we mentioned we are focusing on the virus’ caseload. If things start to peak and turn down with an increase in coronavirus testing, that would allow us to get certain segments of the economy back to work. Overall, we are not advising that everybody stay put and do nothing. In fact, we have made considerable moves in portfolios to get more defensive and to be able to ride this out.
What is your take on mortgage rates and the real estate market in California in general?
There are a couple of things here. One thing is, if you are looking to purchase a home, values are probably going to change on the other side because we are unsure how things are going to go. There is probably also going to be less activity when things restart, and that adds to the uncertainty. The other thing involves mortgage rates – the Fed has already cut rates down to zero and we have seen the 10-year treasury yield get below 1%, which means that mortgages should be fairly cheap. If you can get a mortgage – we believe that it will probably be a bit harder for some individuals to qualify given the job cuts – so the financing should definitely be cheaper.
How is this going to affect the mortgage rates when someone buys or leases now versus in a year or so?
The Los Angeles real estate market did not go down quite as much as some other parts of the country in the past recession, and this is primarily due to two reasons. One is that there is simply less new supply in general. The other reason is that there is usually more cash that is sitting on the sidelines and waiting to come into a market like this. In the bigger picture, however, there is likely to be downward pressure on home prices. Some people will either want to downsize, while others may be out of work. Perhaps the best approach would be to extend the timeframe and not rush things when looking to purchase a home.
This article is provided for informational purposes only and should not be interpreted as investment advice. HCR Wealth Advisors is not affiliated with this site.
