Getting Real about the Possibilities Ahead

Getting Real about the Possibilities Ahead
March 9, 2020 jyarger

Position Update

Toews remains fully defensive across all asset classes.i  Additionally, certain equity-containing strategies hold aggregate bond positions, which have appreciated over the past month, even as stock prices have fallen.

Markets fall and Uncertainty Spikes

In New York City, where part of our team is located, the beginning reactions to COVID-19 are abundant.  Companies, including our own, have issued work from home options or mandates.  Events, conferences, and trips are being cancelled.  People are stocking their freezers and are preparing for the possibility of school closings.  We imagine what life here in New York would be like if our experience mirrors that of the empty squares and streets in Venice and Beijing.  Although it’s impossible to estimate the effect of corona virus contagion in the US on financial markets, fear and the unknown are all it takes to produce the kind of turbulence seen over the past forty days.  The key now is having and sticking to a plan for executing meaningful risk management, and guiding investors in a way that helps ease anxiety and keep them on a long term path.

Getting Real about the Possibilities Ahead

It’s not helpful to downplay the potential impact of the Coronavirus.  Here are some sobering realities:

  • First, as Bill Gates pointed out, “it can kill healthy adults in addition to elderly people with existing health problems.”ii
  • “Disruption to everyday life may be severe” according to Nancy Messonnier, director of the Centers for Disease Control and Prevention’s National Center for Immunization and Respiratory Diseases.iii
  • It’s “almost inevitable” that the COVID-19 will spread across the entire globe, according to Harvard University epidemiologist Marc Lipsitch.iv
  • There are no known cures and a vaccine isn’t likely in the foreseeable future.
  • Risk assets are still priced for perfection, with the trailing P/E on the S&P 500 at 22.05 as of the writing of this update on March 6th, in the upper quintile of historical valuations.v

This may end badly.  Of course, market moves over the short term are inexplicable.  With global stock markets already in correction around the globe, it’s impossible to know if we’re close to a bottom or we’re only beginning the ride down.  But we must consider the latter. Here’s what’s important right now:

Your Portfolios

Ensure that your portfolios are prepared for adversity.   Attempt to limit drawdowns by placing adequate assets in fixed income or risk managed portfolios that have the potential to uncorrelate from economic activity.  These strategies should not be among those with illusory loss avoidance strategies that proves ineffectual during market downdrafts, but rather should be strategies with the ability to exit markets or hold options that help offset extreme losses.


Essential Client Communications from our Behavioral Coaching Toolset.

  1. Let investors know that you have built portfolios to assume that worst case scenarios may occur, including severe downdrafts from unexpected sources such as COVID-19. Explain the role of risk managed strategies, including the possibility that these strategies can potentially benefit from significant market dislocations if they participate in rebounds.  Not only are you not surprised by the type of market move that we’re seeing, you expected similar market losses.

  1. Explain the temptation during falling markets. As prices decline, stocks become more, not less attractive.  The more that markets fall, the more probable the opportunity is for profit ahead.  If stocks fall further and the economy falters, we may face the prospect of rarely occurring bargain prices.



  1. Explain that you have a plan of action already in place. As markets fall, let investors know if you plan to systematically re-balance portfolios into assets with steep declines and take advantage of “Black Friday” sales prices.



This is a rare opportunity to help your clients understand your value proposition and your preparedness for adversity.  We’ll keep you updated as the market evolves.


Phillip Toews, President/CEO

Prior performance is no guarantee of future results. There can be no assurance, and individuals should not assume, that future performance of any of the portfolios referenced will be comparable to past performance. There can be no assurance that Toews will achieve its performance objectives.

This message may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.

This commentary is intended to provide general information only and should not be construed as an offer of specifically-tailored individualized advice.  Please contact your investment adviser, accountant, and/or attorney for advice appropriate to your specific situation. This document refers to the performance of the majority of Toews portfolios to illustrate the effect of Toews management on US and intl. stocks and high yield bonds.  Performance of individual accounts varied based on the client’s investment risk profile and their specific investment funds.  For your individual account performance, please refer to the enclosed quarterly statement or the quarterly statement recently sent to you.  In addition, not all model portfolios were referenced in this letter.  It is not, nor is it intended to be, a comprehensive accounting of Toews asset management.  There are other portfolios that Toews manages that performed differently than what is referenced in this letter. For a complete list of GIPS firm composites, their performance results and their descriptions, as well as additional information regarding policies for calculating and reporting returns, please go to  Toews Corporation acts as the investment advisor that implements the asset allocation and models for each of the portfolios.  Investors cannot invest directly in an index.

For additional information about Toews, including fees and services, send for our disclosure statement as set forth on Form ADV by contacting Toews at Toews Corporation, 1750 Zion Road, Suite 201, Northfield, NJ 08225-1844 or (877) 863-9726.


i This is only true for Toews strategies. Vanguard strategies, for example, are not defensive but are available at Toews.

ii Gates, B. (2020, February 28). Responding to Covid-19 – A Once-in-a-Century Pandemic?: NEJM. Retrieved March 6, 2020, from

iii Bacon, J., & Alltucker, K. (2020, February 26). Could a coronavirus pandemic be stopped? US warns of ‘severe’ disruptions. Retrieved March 6, 2020, from

iv Axelrod, J. (2020, March 2). Coronavirus may infect up to 70% of world’s population, expert warns. Retrieved March 6, 2020, from

v Date accessed 03/06/2020.

vi Always Invested Stocks refers to strategies that have a portion of the strategy that always has an equity allocation. Risk managed stocks refers to strategies that contain asset classes that may go to fixed income and/or cash instruments when defensive. Toews strategies do not generally invest directly in stocks.