LSA June 2020 Revision Announcement

As the economy begins to reopen from COVID-19 concerns, LSA has implemented revisions to the following portfolios: Private Client, PC Tax Eff, PC Traditional, PC Blended, ETF, ETF Tactical, PC Income Strat, PC Income Focused. These changes have been implemented for the NTF solutions as well. IPC has posted the COVID-19 Part IV presentation and video to help support the rationale around the recent changes. The LSA IPC will be addressing all other models in the coming weeks.

Posted Tuesday, June 2nd, Private Client, PC Traditional, PC Blended, ETF – Targeted trade date – Tuesday June 9th.

Posted Thursday, June 4th, ETF Tactical, PC Tax Eff, PC Income Focused, PC Income Strat – Targeted trade date – Thursday, June 11th.

*The Mutual Fund and ETF revisions will impact the NTF models as well.

*As a reminder, the Revision Explanation Presentation/Video will be posted in the “Portfolio News,” section on each of the platform home pages.

Investment Rationale:

In past cycles, equity bear markets and subsequent recoveries have unfolded over months, not weeks. This more recent volatility event was different on that front. Compared to how trading was conducted decades ago, the current flood of news through electronic sources, institutional algorithmic trading systems, and fast (and now largely free) retail trading has generated higher volumes. By adding low-cost market, factor, and thematic exchange-traded funds to the mix, the ease in implementing exposures may also be exacerbating the day-to-day volatility markets experience. This created a few hiccups in bond markets, where underlying bond holdings are far less liquid, causing the fewer offered exchange-traded products to act as a ‘safety value’ for price discovery and liquidity. This function has also added to volatility, and no doubt was a factor in the Fed’s decision to provide liquidity and buying power to these markets—a validation of their widespread usage and growing importance to financial market health.

In terms of pricing today, many market strategists are in agreement that where we go from here remains heavily dependent on the medical landscape. This makes the situation more fluid and more of a wildcard than we’ve been used to. In normal downturns, even if economic forecasts aren’t perfect, some modeling can be done to provide a rough framework for recovery. In this case, the depth and length of the downturn is likely very much dependent on the spread/waning of the virus and the global economies to get back to business as usual.