TO: Valued Fund Holders

FROM: Janice R. Black, President & CEO
The Foundation for Enhancing Communities

Robert J. Caplan, MBA, CFA,
Chair, TFEC Investment Advisory Committee
Vice Chair, TFEC Board of Directors
Chief Executive Officer, River Wealth Advisors

DATE: March 20th, 2020

The speed and magnitude at which the federal and state governments are responding to mitigate the impact of COVID-19 are unprecedented. If we’re not watching the stock market, we’re watching press conferences, reading the latest developments from trusted news sources, and watching 24/7 coverage on the dedicated news channels on TV. And, when I say “we,” I mean all of us.

The government, at all levels, is working round the clock to do what it can to safeguard our country from the virus, help stabilize markets, and develop a path forward that will set the country, and world, back on track as quickly as possible.

Here is a brief summary of what has happened in the last few days:

• The Federal Reserve: The Fed cut interest rates to almost zero; said it’s prepared to inject trillions of dollars to buy securities from financial institutions; cut bank reserve requirements; and agreed to buy short-term debt from companies with good credit ratings. These maneuvers will help stabilize systemic risks in the financial markets.

• The Federal Government: On March 13, President Trump declared a state of emergency, which opened up numerous avenues for the administration to put immediate actions into place. For example, the 62 million Medicare participants are now able to access telehealth services, temporary hospitals are able to be erected to handle an overload on the health care system, and more. On Wednesday, the President invoked the Defense Production Act, which allows the country to ramp up with medical supplies, among other things to protect our national security. Additionally, the Senate approved the House-passed Coronavirus Relief Package, which provides free testing for the COVID-19 disease, requires smaller employers to provide at least two weeks of paid sick leave to many of those affected by the virus, increases Medicaid funding, expands unemployment insurance, and provides more money for food stamps. All of these measures are aimed to provide an initial safety net as lay-offs begin and the Coronavirus cases hit every state. The administration has also been working with Congress on a nearly $1 trillion stimulus package to reinvigorate the U.S. economy and to provide relief to businesses and workers who have been hardest hit by the crisis. This equates to roughly a month and a half of pre-crisis US Gross Domestic Product (GDP). A 90-day tax holiday has also been declared, which will delay required payments to the IRS. While Americans still need to file their tax returns by April 15, no payments are required to the IRS until July 15, whether it be for 2019 tax returns or estimated quarterly payments.

• The Market: On Wednesday morning, the Dow Jones Industrial Average fell below 19,000, wiping out all of the gains from the last four years. The blue-chip index fell more than 10 percent, the benchmark S&P 500 was down by nearly 10 percent, and the tech-heavy Nasdaq Composite traded down by nearly 9 percent. There will be continued volatility in the markets until the “curve (of the virus) flattens out” and the economy starts to show signs of stability and growth.

Our Investment Advisory Committee is well aware of these developments and we wanted to take this opportunity to remind you of our investment philosophy which is; TFEC must invest with a very long-term view, we have adopted a disciplined, passive investment strategy. We do not react in a buy/sell manner even when the markets fluctuate in such a volatile manner as they have over the last few weeks. This strategy also suggests that we not try to outperform the market in any given year. Rather, in the case of equity investments, our passive strategy attempts to achieve at least the overall growth of the stock market, which since embarking on this strategy in 1996 has returned on average approximately 8.9% annually either achieving or exceeding market benchmarks.

We will continue to operate under the guidelines of our investment philosophy and remain principled in “staying the course.”

We promise to keep you apprised as further developments warrant. In the interim, please do not hesitate to contact us with any questions you may have.