The Coronavirus and Market Volatility


The world is watching with concern the spread of the new coronavirus. The uncertainty is being felt around the globe, and it is unsettling on a human level as well as from the perspective of how markets respond.

At wHealth Advisors, we accept the fundamental principle that markets are designed to handle uncertainty, processing information in real-time as it becomes available. We’ve witnessed this volatility over the past 3-4 weeks. Such declines can be distressing to any investor, but they are also a demonstration that the market is functioning as we would expect.

Market declines can occur when investors are forced to reassess expectations for the future. The expansion of the outbreak is causing worry among governments, companies, and individuals about the impact on the global economy. As an example, last month Apple announced that it expected revenue to take a hit from problems making and selling products in China. Airlines are preparing for the toll it will take on travel. Local businesses are worrying how their bottom lines will be impacted from preventive measures such as self-quarantines and social distancing. From the largest companies in the world down to our corner coffee shops, these are just a few examples of how the impact of the coronavirus is being assessed.

The market is clearly responding to new information as it becomes known, but the market is pricing in unknowns, too. As risk increases during a time of heightened uncertainty, so do the returns investors demand for bearing that risk, which pushes prices lower. Our investing approach is based on the principle that prices are set to deliver positive future expected returns for holding risky assets.

We can’t tell you when things will turn or by how much, but our expectation is that bearing today’s risk will be compensated with positive expected returns. That’s been a lesson of past health crises, such as the Ebola and swine-flu outbreaks earlier this century, and of market disruptions, such as the global financial crisis of 2008–2009. Additionally, history has shown no reliable way to identify a market peak or bottom. These beliefs argue against making market moves based on fear or speculation, even as difficult and traumatic events transpire.

When it comes to managing your portfolio, it’s prudent to develop (and stick with!) a long-term plan than can be maintained in a variety of conditions. For our clients, we consider a wide range of possible outcomes, both good and bad, when helping to establish an asset allocation and plan. Those preparations include the possibility, even the inevitability, of a downturn. Amid the anxiety that accompanies developments surrounding the coronavirus, decades of financial science and long-term investing principles remain a strong guide.

We send our best to you and yours. Wash your hands, avoid touching your eyes/nose/mouth, and, as always, feel free to contact us at

10/16/2020 Editor Note: Our co-founder, Dennis McNamara, was featured as a financial expert on Dr. Wealth where he weighed in on investing in a post-COVID world. Link to contribution here: 

Climate Change and Your Portfolio

Written by: Dennis McNamara


 As financial planners that adhere to an evidence-based investment philosophy, we at wHealth Advisors use historical stock market data to infer a potential range of future outcomes. With reliable data only going back to the mid-1920s, trying to predict future market performance based on these “historical” figures is a fool’s errand. Instead, we like to work with our clients to focus on the things that they can control:

  • Increasing saving rates, decreasing spending rates
  • Reducing the cost of asset management and investment expenses
  • Minimizing tax liabilities by proactive tax planning
  • Aligning stock market exposure to tolerance/ability to take risk
  • Ignoring market noise and sticking to the plan

An evidence-based climate scientist, on the other hand, relies on data that goes back roughly 11,500 years to the Paleolithic Ice Age – a more robust sample study, to say the least. So, let’s get right to the point of this blog: Climate change is real and it is going to impact the long-term performance of our global markets (and thus, our portfolios) in unpredictable ways. This is factual science, not a controversial position. For starters, look to PG&E, the California utility company that filed for bankruptcy this January after facing $30 billion in fire liabilities after its power lines sparked what became California’s deadliest wildfire yet last fall. Besides utility companies, climate change will inevitably impact business in nearly all industries – agriculture, insurance, and energy to name a few. All industries operate within a global ecosystem and any climate event that results in a negative outcome (regardless of region or industry) will have negative downstream effects to our financial markets.

In an effort to stay abreast of these potential impacts from an investment (and humanity) standpoint, I attended four events as part of Climate Week 2019 in NYC:

  • NYC Climate Strike (marched with my wife, son, and mother)
  • Climate Finance & Investment Summit hosted by the London Stock Exchange
  • 2019 Annual Climate Week Briefing hosted by Moody’s Investor Services
  • Quantifying Climate Risk hosted by S&P Global

What the world’s largest asset managers are doing:

Of the many speakers I had the pleasure to listen to, Hiro Mizuno, the Chief Investment Officer of the Government Pension Investment Fund (GPIF) of Japan, shared some of the most thought-provoking insights. As the CIO of GPIF, Hiro manages the single largest sovereign pension fund in the world. In a room full of big fish that included the NY State Comptroller (oversees NY State pension, 3rd largest in US, $210B) and Investment Director for CalSTRS (CA state pension, 2nd largest in US, $238B) – Hiro was the whale (manages over $1.5 TRILLION – approximately 1% of all assets in the world).

What makes Hiro’s insights so valuable is that, unlike a typical investor whose long-term outlook spans roughly 15-30 years, GPIF’s long-term outlook extends somewhere between 50-100 years. To Hiro, climate change is not some abstract thing, it’s a very real threat to the world (and thus, the world economy) and it requires action across all of society and industry today. Given GPIF’s size and time horizon, the fund is in a unique position to change the world. One way that it attempts to do this is by rewarding companies for behavior that it deems good for the world economy over the long-term while penalizing behavior that is bad. In theory, and in oversimplified terms, this rewarding/penalizing is done by overweighting (i.e. investing more) in the companies doing good and underweighting (i.e. investing less) in the companies that need to do better.

In order to judge whether a company is doing good or needs to do better, they are first compared to the other companies within the sector they operate. If the sector is energy, for example, we might compare Exxon, Shell, and BP. Companies are then compared to each other based on their Environmental, Social, and Governance (“ESG”) conduct. Breaking these three ESG legs down further:

  • Environmental: Considers a company’s greenhouse gas emissions, their waste and pollution outputs, and their water and land use.
  • Social: Considers workforce diversity, workplace safety standards, customer engagement, and community impact.
  • Governance: Considers company structure, transparency, and disclosure reporting.

When deciding which companies to reward/penalize, GPIF and other asset managers would consider factors that are common across all industries while also including factors that are unique to the sector. In this example, some of these factors would include the energy company’s greenhouse gas emissions, their investments in renewable energy and carbon capture technology, and their level of transparency/disclosure. In a perfect world, Exxon, Shell, and BP could be compared apples to apples and rewarded/penalized commensurate with their efforts. For example, if Exxon was doing the most to limit greenhouse gases, if it invested the most in renewables/carbon capture, and if it disclosed these metrics with reasonable transparency, they might receive a larger investment from GPIF. Inversely, if BP was the environmental laggard of the energy industry, GPIF could reduce their investment exposure on the basis that BP is not being a good environmental steward which is bad for the world economy over the long-term.

The Dilemma

According to Hiro and the other keynote speakers and panel participants, the biggest wrench that prevents this process from working as intended is the lack of transparency and disclosure by public companies (specifically, public companies in the US). The Securities and Exchange Commission (“SEC”) currently limits mandatory disclosure to issues that materially impact shareholders/investors. Unfortunately, the SEC does not deem the ESG metrics as having any “material” impact (despite a petition from $5 trillion worth of institutional investors that do deem ESG factors as having a “material” impact). Unlike the US, two dozen other countries require this type of mandatory reporting and seven stock exchanges already require ESG disclosure as a listing requirement.

Long story short: If a company is not measuring or reporting their greenhouse gas emissions, and the SEC does not mandate this reporting as part of shareholder disclosure, GPIF and other asset managers have little to no ability to factor ESG measures into their overweighting/underweighting analysis.

While there is much promise that modern finance can play a role in the fight against climate change, the current bureaucratic roadblocks make this an uphill battle. Withdrawal from the Paris Climate Agreement and the repeal of the Clean Power Plan make it clear that the current political environment does not favor enhanced ESG disclosure. According to S&P Global, only 15% of public companies have acceptable ESG reporting disclosures while 37% have taken NO action to disclose. Asset managers have since lowered the bar and are now rewarding companies simply on the basis of whether or not the company disclosed any ESG details/disclosures.

What this means for you, the individual investor

With the rising popularity of ESG-focused mutual funds and ETFs targeted towards individual investors, there are options to invest in funds that underweight greenhouse gas intensive industries (i.e. energy/utility companies) in favor of less environmentally offensive industries. However, similar to the dilemma faced by Hiro and GPIF, a lack of mandatory ESG disclosure means that these ESG-focused funds are being designed without any uniformly reported data (remember, 37% of companies don’t even report on ESG!).

There is also the question of subjectivity. What about companies with poor track records that are trying to improve? Take Dow Chemical Company, they (and acquired company, Dupont) have committed environmental travesties but recently pledged $1 billion to “nature-enhancing” projects between now and 2025. Does Dow belong in an ESG fund*? Given the chemical industry’s lack of transparency and disclosure, how does an ESG fund determine whether to overweight or underweight Dow vs. its competitors? Combine these subjectivity concerns with the fact that a) ESG mutual funds typically cost more than comparable index funds and b) many are still new and have a limited performance history – the decision to invest in ESG is complicated.


In order for the financial industry, and Chief Investment Officers such as Hiro, to have an impact on climate change, reporting requirements need to include ESG metrics. At this moment in time, even as a staunch environmentalist, I do not view an individual’s portfolio as an effective tool to combating climate change. My hope is that with increased ESG reporting standards that this will change. For now, and like the recommendations we provide to our clients, let’s focus on what we can control.

The most effective ways individuals can mitigate their carbon emissions (listed in order of impact**):

  • Have one fewer child (pound for pound the most environmentally impactful decision an individual can make. NOTE: Prince Harry and Meghan Markle recently committed to having just two children for this very reason.)
  • Live car-free (unrealistic for many, so consider hybrid/EV when purchasing a new vehicle)
  • Avoid airplane travel (also unrealistic for many, consider purchasing carbon offsets to minimize carbon footprint from air travel through social enterprise firms such as Terrapass)
  • Eat a plant-based diet (bonus: this is also linked to improved health and longevity)

In a time where many of us feel overwhelmed or disheartened about the risks ahead, I consider myself rationally optimistic. With risk comes opportunity. Capitalism, whatever your opinion on it, has afforded us a standard of living beyond what our ancestors could have ever imagined. By combining capitalistic forces with sound environmental policy (i.e. policy that is rooted in science!) I am confident that we can (and will) pivot to a more environmentally and financially sustainable future. The onus begins with each and every one of us – so ditch the car, go for a walk with your intentionally small family, and eat some veggies!

Hope that you enjoyed and thanks for taking the time to read! Please feel free to contact our team at

*Dow Chemical Company is included in the Dimensional US Sustainability Core Fund (DFSIX).

** Seth Wynes and Kimberly A Nicholas 2017 Environ. Res. Lett. 12 074024

How Much Are You Really Paying For Your Investments?

Lady counting money

Written by: Dennis McNamara

In a recent Wall Street Journal article , Andrea Fuller recounts her experience of searching for the fees that she is paying for her financial advisor and investments – the advisor is an employee of one of the largest financial advisory companies. What Andrea did not expect is that this hunt would require a steadfastness and rigor similar to that of Indiana Jones searching for the Holy Grail.


The first place that Andrea looked to find her fees was in her monthly statements. No luck. Next, she explored the company website. Again, no dice. She then spoke with various customer service representatives who were unhelpful and opaque. Ultimately, Andrea spoke with an advisor who shared that her total combined fee (advisory fee + fund expenses) was 1.4% of assets under management. This advisor has yet to provide any documents to her that show these fees in writing.


Does a 1.4% fee sound high? It should. With many “financial advisory” firms, the scope of their work is limited to investments or insurance (i.e. the products they sell!). A 2016 white paper from Personal Capital concluded that average fees for these “financial advisory” firms ranged from 1.07% to 1.98%. This then begs the questions: Are the investment and insurance products that these firms sell superior to other options out there? The answer: Absolutely not. Simply put, the employees of these firms are highly paid salespeople that rely on the ignorance of the general public.


How do you know if your advisor is taking advantage of you? Request the he or she agree, in writing, to disclose all conflicts of interest and to always act solely in your best interest. If they can’t agree to this, consider shopping around for a fee-only advisor that can.