The recent record market drops has caused some investors to revert "back to hoarding cash."
That's the assessment from Scott Powell, managing director of common stock and managed account investments at MEMBERS Capital Advisors. Powell said the move is being made "under the banner of protecting capital as the 'quick fix' that everyone would like to see remains no where in sight."
"Against the ongoing backdrop of predominately dismal earnings, economic and sentiment reports, now coupled with concern and trepidation over the effectiveness (or lack there of) of the new U.S. government bailout package, many traders are moving out of risk assets putting a lot of pressure on the market," Powell wrote in MEMBERS Capital's Feb. 17 MarketLine alert.
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Powell said a new managed account and fund of fund portfolios over the balance of this month will include more flexible portfolio construction, a focus on cash flow generation for distribution or compounding reinvestment and the inclusion of investment vehicles such as absolute return strategies designed to help modify the volatility of investor's portfolios.
"We are asking advisers to review client positions and conduct appropriate time diversification analysis. We have to be prepared for a long, drawn out recovery process with the recouping of capital values requiring MUCH patience and perseverance," Powell wrote.
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