Raleigh, NC, April 16, 2020 - Individual investors, from those beginning to build their nest eggs to those nearing or in retirement, just suffered through the quickest plunge into a bear market since the Great Depression - a gut-wrenching 34% collapse in the S&P 500 from its February 19th peak to its March 23rd nadir.
Most investors rightly feel shell-shocked and left with a sense that they had no time to react. Those who are clients, however, of Fortress Financial Partners, a Raleigh, NC-based registered investment advisor, are probably breathing a sigh of relief. On February 28th, almost two weeks before the World Health Organization declared the coronavirus a global pandemic, Fortress made the call to move its clients out of equities and entirely into the safety of cash.
It wasn’t the first time that Fortress made such a move. Early into what became a full-blown market meltdown in the fourth quarter of 2018, Fortress similarly moved its clients, who include high net worth individuals, families, and corporations, into cash and protected them from significant capital losses.
What prompted those prescient moves? According to Joe Grabar, Fortress’ Managing Principal, “Our highly-disciplined investment process, grounded in technical analysis, indicated the trend was broken, the market was damaged, and there was most likely more selling pressure ahead. At moments like these, we do not believe clients are adequately rewarded for the risk of remaining invested in stocks. This is the time to be defensive and hold cash.”
Grabar’s partner at Fortress, Chris Gure, added, “When there is so much uncertainty about the length of our economic shutdown and about the vagaries of a virus to which we are all hostage, one can’t make rational judgments as to economic prospects such as future earnings. In situations like today, traditional fundamental analysis is simply impossible to perform. Technical analysis, however, which has always been Fortress’ hallmark, still provides a wealth of information and insight. Needless to say, our strength in that analysis serves our clients especially well in the current environment.”
How do Fortress’ clients react to such a drastic move? “When the technical indicators were sounding the alarm,” noted Michael Hemmerich, another Fortress partner, “not only were we converting client portfolios to cash, we were simultaneously and proactively reaching out to our clients to explain our moves, to reassure them, and to answer any questions they may have in these unsettled times. We’re as proud of that as we are of our market analysis.”
And what type of recovery do the Fortress partners foresee? Said Grabar, “It is still a bit early to know if it will be a V-, U-, L-, or W-shaped recovery. What we can say with confidence, however, is that we will follow our process of incorporating technical analysis, economic fundamentals, and stock valuations to position our clients’ portfolios going forward. We are confident there will be a recovery. I know I speak for everyone in saying that we hope that time is sooner rather than later.”