(916) 797-7370 JE.Legacy@gmail.com

April 27th, 2020

Chadd Mason, CEO The Cabana Group

Will COVID-19 Change Our World (and our Markets) Forever?

As our country begins to consider reopening for business, I am left wondering how we will forever be changed? Will we shake hands with new acquaintances? Will we travel for meetings or will we stay put and Zoom? Will home delivery of food, groceries and other goods become the norm? Will college education be an online experience? Will live entertainment and sports become a virtual event? Do any of us really need traditional offices? All of these questions and more will be answered over the next months and years. While nothing in life is black and white, humans are evolutionary beings. We adapt and change in the face of adversity. It is this continual process that ensures the survival of our species and results in us emerging stronger than ever, albeit different.

So, what does this mean for us as investors? I believe that “markets” are simply a microcosm of humans and the societies that we build. As such, they evolve and adapt as well. Like humans, markets follow certain fundamental rules, which serve the basic underlying needs of investors. In this way, the game itself never changes. While zone defense may be replaced by man-to-man coverage and the wishbone offense may be replaced by the spread, it’s still football. In the world of investing it is still all about risk and reward, choosing the most attractive asset class at a given time and putting our capital in that bucket. As we grind through economic cycle after economic cycle, we see that each major asset class (stocks, bonds, real estate, commodities and the U.S. dollar) periodically falls in and out of favor. This is true now and will be true in the future. It is a zero-sum game and each asset class is judged relative to the others. We can take comfort in the idea that just as we will emerge stronger, although a little different, so will our markets.

I have been asked a lot recently about whether this bear market is over. Bear markets in stocks are caused by a decline in the earnings of companies and the resulting decline in gross domestic product. This is otherwise known as a recession. Falling stock prices are merely a symptom of this reality. Terrorist attacks, financial crises and even global pandemics do not themselves cause bear markets. They do however hurt companies’ ability to generate and grow earnings – and that does cause bear markets. It is always about the earnings. We are just in the early innings of learning how much the coronavirus is going to hurt earnings over the next few month or years. Much of the outcome will depend upon the speed at which a medical solution is reached, as well as the changes that we as a culture adopt. There will be winners and losers. It is the search for equilibrium and the extent of lost earnings during the interim that will decide the length of this bear market. Are earnings going up or down? When they stop going down, we will know the bear market is over.

IMPORTANT DISCLAIMERS
This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at www.adviserinfo.sec.gov/.

The Financial Advisor Magazine 2018 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be   representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor magazine. RIAs were ranked based on percentage growth in year-end 2017 AUM over year-end 2016 AUM with a minimum AUM of $250 million, assets per client, and growth in percentage assets per client. Visit www.fa-mag.com for more information regarding the ranking.

The Financial Advisor Magazine 2019 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor Magazine. Working with a highly-rated advisor also does not ensure that a client or prospective client will experience a higher level of performance. These ratings should not be viewed as an endorsement of the advisor by any client and do not represent any specific client’s evaluation. RIAs were based on number of clients in 2018, percentage growth in total percentage assets under management from year end 2017 to 2018, and growth in percentage growth in assets per client during the same time period.  Visit www.fa-mag.com for more information regarding the ranking.

No client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for any investor. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. While loss tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account. It is the responsibility of the advisor to determine what is suitable for the client. An advisor should not simply rely on the name of any portfolio to determine what is suitable. Cabana manages assets on multiple custodial platforms. Performance results for specific investors may vary based upon differences in associated costs and asset availability.

Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to info@thecabanagroup.com.