Inflation continues to be the hot topic in financial markets and is shaping up to be a defining macro story of the next decade. One aspect of the inflation debate which we did not touch on in our Inflation Fixation note is what about the monetary and fiscal stimulus? US Government spending in response to fighting Covid was the highest since World War 2 at over 30% of GDP with more spending in the pipeline. The spending is high in a vacuum but it is also coordinated throughout the World by both Central Banks and Governments. What’s more is we have a new Presidential regime which has made spending a pillar of its social policy signaling that austerity is probably not in the cards.
Could this combination of a hesitant Fed, aggressive stimulus injection, and ambitious future spending goals signal that the Fed will be behind the ball on curbing...
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Maybe some would say a good problem to have when considering where things were a year ago, but a primary risk to markets now is that the economy is overheating. We have made note of the inflation readings that have jumped meaningfully over the past several months, but why could this signal a risk for markets? Because it raises the possibility of Central Banks pulling back some of the stimulus which has helped support markets since last March. In response to the inflation jump Fed officials have been adamant about portraying the price spikes as transitory. But at the same time have begun to discuss the possible tapering of asset purchases leading many investors to bring forward their expectations for the first rate hike. In our view this will be the key source of volatility for markets in the second half of the year, particularly in August during the... 
If you have tried to buy something like a car or washing machine lately you probably know firsthand about the challenges of lean inventories & price pressures and are not surprised by the surge in inflation readings that have filled media headlines. Inflation is not only salient because it affects businesses/consumers but also because of its effect on interest rates, and therefore asset prices. But inflation is also an economic phenomenon in the sense that it is maybe the most discussed financial topic but also the least understood by forecasters when applied to real world developed economies. In our January 2021 Economic Outlook we highlighted runaway inflation as a key risk for the economy in the New Year, but also why the long-term picture is not as clear.
The view by the Federal Reserve and one which we largely share is that inflation will be transitory driven by supply chain... 
The economic momentum continued its recovery from the pandemic induced lockdowns in the 1st quarter 2021 with real GDP expanding at an annual rate of 6.4% in the first quarter of 2021. Massive spending measures by the government, unprecedented Fed policy measures, overall strong employment recovery and greater vaccination rates drove strong economic activity, delivering strong S&P 500 operating earnings largely above expectations up 34.1% year over year trending at $187.43 from $139.00 at year end. Inflation reached 2.6% in the first quarter due to reopening demand along with material and product shortages. Consumer spending expanded 10.7% at an annual rate in the first quarter supported by strong household income as federal stimulus checks continue.
The rotation into cyclical – value stocks which started last September continued in the first quarter which helped thrust the S&P 500 to new highs despite consolidation in the mega caps. Equity markets are priced... 
One principle of investing that we constantly reiterate because we believe it is so foundational is the concept of keeping a long term mindset in the capital markets. This is especially difficult in today's world that is rife with instant transmission of information and fast money strategies revolving around SPACs, Crypto, and reddit “meme” stocks. In fact it almost feels inhuman to be indifferent to the constant hurling of strong opinions easily transmitted through social media and instead see the big picture. But history has proven time and time again that the most effective strategy to growing wealth is to purchase shares of strong businesses at reasonable prices and then simply let time and compound interest do its work. Most American fortunes were earned via ownership of strong businesses for many years.
Not only does time allow stocks to execute their compounding nature but it also lowers the risk... 
Covington Investment Advisors, Inc. is pleased to announce that Cindy Jones has earned the Chartered Financial Analyst (CFA) designation. This designation requires successfully completing a series of three exams covering a wide range of topics related to financial analysis. In addition to passing the exams, other requirements include having relevant work experience, submitting professional references, and adhering to the Code of Ethics and Standards of Professional Conduct of the CFA Institute. Additionally, she holds the Series 65: Uniform Investment Advisor Law license.
Cindy joined Covington in 2012 as Assistant Portfolio Manager and currently holds the positions of Portfolio Manager and Chief Compliance Officer. She earned a Bachelor of Science degree in Applied Mathematics with additional studies in Computer Science and Statistics from the University of Pittsburgh.
As Portfolio Manager, Cindy oversees the firm’s investment committee’s processes for determining the buys, sells and holds of all the securities held by the... 
Market drawdowns and Bear Markets are a reality when it comes to investing in the equity markets. Part of the reason equity holders receive a higher long-term return over ‘safer’ investments such as bonds is that they take on additional risk and the likelihood that their investment will be negative over stretches of time. Of course no investor wants to experience their investment losing money but this year illustrates perfectly why sticking to a plan and staying invested while owning proven enterprises with strong balance sheets is the prudent approach. This fact of investing is nothing new but the rise of social media and the competitiveness for media headlines since 2010 have given way to a flood of negative market calls which naturally appeals to human negativity bias and our survivorship instincts. This appeal strategy has worked in part because the flood of calls followed two of the deepest bear... 
Early last week Pfizer announced data on the clinical trial of their COVID-19 Vaccine candidate which was followed up this week by results from Moderna. It’s easy to see why there is so much excitement over the news as the reported 90 and 94.5 percent effectiveness would put the vaccine on par with the Chickenpox, Mumps, Polio, and Whooping Cough vaccine, and much further ahead than our typical flu vaccine. The logistics of distributing the vaccine will be difficult and likely take months but progress in the development aspect is hopeful.
The news comes at the same time that daily cases and hospitalizations are reaching all-time highs. We now have more clarity on what the end destination looks like (vaccine rollout and distribution in second half of 2021) but perhaps less clarity on the path as the spike in cases will weigh on consumer spending in the near-term. At the... 
Although a presidential winner may not be determined until potentially the end of the week, one takeaway from election night is that the Republicans will likely keep control of the senate, meaning congress will be divided. This could be partially responsible for the large rally in equities following last night’s initial election results. Historically, equity markets have performed well in this environment with stocks being higher in the last ten years with a split congress. Although this election is far from over with a recount/legal challenge likely, a split congress actually adds some clarity as any significant legislative bill for either party will be difficult to pass. This includes a repeal of the 2017 Tax Cuts & Jobs Act which we wrote about in June and can be found here.
Commentary Disclosures: Covington Investment Advisors, Inc. prepared this material for informational purposes only and is not an... 
Is cash still king? In the world of global payments, not so much anymore. Cash usage is at an all-time low giving way to the transformation to card/digital. According to the latest Nilson report, cash made up less than 20% of US payment volume in 2019 (by total reportable $ value), and is forecasted to fall to less than 15% by 2023. The demise of cash is one of the trends that has been in place for decades but has been accelerated by circumstances arising from COVID-19. The ability for card payments to now be administered in a contactless manner via ‘tap-to-pay’ has been a useful tool for consumers that want to avoid contact at the checkout aisle. Pair this with most consumer spending shifting to Ecommerce channels during quarantine and the demise of cash has been expedited.
The scale of the large pure-play payment networks, Visa and Mastercard, is... 
A historical blend of events in 2020 including the COVID-19 pandemic, shift to a work-from-home economy, and record low interest rates, created the perfect storm for large-cap US tech to structurally outperform the broader market. This outperformance has reversed in recent days with the S&P 500 falling 2.27% and the tech-heavy NASDAQ falling 3.25% last week. This sell-off might have been unavoidable given how stretched some of the valuations for the headline growth names have become relative to their historical ranges and profits began to be taken. It is difficult to see how operationally these tech companies will not continue to benefit as they have for so long, but in the near term a “catch up” rotation could be taking place in the market as the reopening of the economy accelerates, and those industries that have been decimated revert to the mean. In our previous blog post "Air Traffic Data... 
Although our investment holdings at Covington consist mainly of large multinational corporations, small businesses make up the backbone of the US economy. The most effective policies for defeating the virus are also the worst for small businesses (absent a vaccine). The mandatory shutdowns created a record number of “temporarily unemployed” workers who were laid off but expected to return to work quickly. To help small businesses deal with this the government developed the PPP program to maintain their employment levels. This program was certainly not without its flaws, but all things considered, helped cushion the blow at least partially. The $600 additional unemployment benefits was also established. This did help buoy consumer spending but not in a proportional way to benefit small businesses as in lockdown most spending had to go through online shops. The $600/week supplement also created the problem of trying to rehire workers quickly as some low... 
Cases continue to rise with the US registering its new daily record of over 70,000 cases on Friday. Deaths have also increased, but not with the same magnitude as case growth. The disconnect in deaths and cases is partially attributed to the continued ramp in daily testing. The US is now testing over 700,000 citizens a day. One of the attached charts shows the positivity rate (daily new positive tests divided by daily total tests) overlapping daily cases to show the relationship. The positivity rate gives a clearer picture of what the true infection growth is.
Lawmakers look at this positivity rate in their respective states/counties as one of the key metrics to decide whether to relax, or tighten social distancing measures. If the infection rate is not tamed, it could mean that those industries most affected by shutdowns (Leisure and hospitality) will not be able to open.
... 
The European Commission recently released their ‘Summer Forecast’ for the EU/Euro Area economy where they downgraded their own projection from earlier in the year. The original -7.4% GDP contraction expected for the EU economy has been reassessed to -8.3%. Even despite the swift and comprehensive policy response from the European Central Bank and EU governments, the lack of resilient technology giants like the US possesses, along with less diversified economies has hurt the European bloc proportionally worse. Also, social distancing measures were stricter in most EU countries meaning better virus control but worse economic damage to this point. Italy has shouldered the brunt of damage with GDP projected to fall 11.2% in 2020, while Sweden and Denmark are so far the least scathed projecting a < 5.50% decline.
7/10/2020
Commentary Disclosures: Covington Investment Advisors, Inc. prepared this material for informational purposes only and is not an offer... 
“This time it’s different” is a dangerous phase in the economics world. Recessions don’t typically result in personal income increasing, but this one has thanks to coordinated global fiscal/monetary support. However, soon the US faces a “benefits cliff” with the additional $600 per week of unemployment benefits set to end on July 31st and normal UI benefits for those who were part of the initial layoffs in March ending in September. Congress is expected to put together some kind of extension for these stimulus efforts but the two parties remain far apart on what exactly the next phase would look like. This stimulus is important because it has essentially buoyed consumer spending during the shutdowns. All income classes have seen their spending bounce significantly from the late March lows. But as we keep mentioning, stimulus efforts can only be temporary. Economies need to continue reopening and true economic activity needs... 
Certain industries/pockets of the economy are seeing a quicker recovery than others. The TSA keeps track of the amount of passengers originating trips from US airports. On a normal day in March that number is over 2 million, at the height of government shutdowns this year it was less than 90,000. Recently air traffic has recovered with daily passengers in the last week eclipsing 700,000, but this is still a long ways off from a “V-Shaped” recovery in air travel. Keep in mind airlines have high fixed costs, large amounts of overhead, and razor thin margins. Most airlines are simply not solvent if air travel is less than half normal traffic for a prolonged period of time.
We think this polarization in recoveries from one industry to another will continue and even worsen the longer the virus lingers in the economy. Some industries are seeing enormous demand tailwinds (Cloud, Ecommerce,... 
Cases fell slightly from their peak over the weekend but still remain high, particularly in the new “hot spot” states (Arizona, Florida, Texas). Many of these states have now imposed stricter social distancing guidelines after remaining relatively open during the pandemic. Even after 10+ days deaths have still not followed the increase in case load. The lag time window is not an exact number of days but this is still encouraging.
Commentary Disclosures: Covington Investment Advisors, Inc. prepared this material for informational purposes only and is not an offer or solicitation to buy or sell. The information provided is for general guidance and is not a personal recommendation for any particular investor or client and does not take into account the financial, investment or other objectives or needs of a particular investor or client. Clients and investors should consider other factors in making their investment decision while taking into account the current market environment.... 
US households have weathered the COVID crisis relatively well up to this point but there are two deadlines coming up for US consumers that could prove to stall out the economic recovery. On July 31st the extra $600 unemployment benefit per week as part of the CARES act will run out. Unemployment benefits normally last 26 weeks meaning workers who lost their job in March as part of the initial government shutdowns will exhaust all of their unemployment insurance benefits in September. Initial Jobless claims have fallen sharply from their peak but returning citizens to work may take longer than most are currently expecting. If more fiscal support is not extended to households by keeping the expanded unemployment benefits or implementing a fresh round of stimulus the risks will begin to rise that the US will experience a widespread solvency crisis in the household sector.
Commentary Disclosures: Covington Investment... 
Although the nationwide COVID-19 infection rate has tapered off from its peak in April, different regions are at different points in their cycle. Coastal population centers in the Northeast look to be for the most part past their peak, while states in the West and Southern regions have seen their cases tick up recently. A second wave of cases is to be expected as societal activity continues to resume and widespread testing is being implemented. As we mentioned in previous notes, reopening will be a process. The graphic below, sourced from visualcapitalist.com, shows US states sorted by their COVID-19 peak dates. Also included is our US COVID-19 slides from our June Chart Book showing US & global trends. We will continue to monitor these developments.
Commentary Disclosures: Covington Investment Advisors, Inc. prepared this material for informational purposes only and is not an offer or solicitation to buy or sell.... 
In previous notes we mentioned the possibility of a “Second Wave” of cases popping up as activity resumes and social distancing measures are relaxed. In the last week cases have begun to rise across the nation, particularly in states that until recently have not seen a huge case load from the virus. The increase itself was to be expected but the severity of new case growth is still alarming. On June 26th the United States reported a new record in daily COVID-19 cases, most of which came from southern and western states. The encouraging sign from recent data is that so far daily deaths have not kept up with the pace of new cases. This implies that treatments are improving dramatically and testing remains robust. Keep in mind new deaths tend to lag cases so we remain hopeful that the fatality rate continues to fall.
Also encouraging is that households... 
As you may recall, in early 2017 we started the initiative to combat the Opioid Epidemic in our area and were seeking a Federal High Intensity Drug Trafficking Area (HIDTA) Designation for Westmoreland County. When we started this initiative, the overdose rate of deaths in our county was growing at 46% per year. The complete costs associated with these deaths is immeasurable in terms of the families affected and the lost contributions these individuals may have had in our communities.
Although our original efforts were thwarted due to political reasons, I am pleased to say that Westmoreland County has finally been designated a HIDTA by the White House’s Office of National Drug Control Policy. Westmoreland joins three other Southwestern PA counties (Allegheny, Beaver, and Washington) in receiving dedicated federal resources to coordinate federal, state, and local government to fight drug trafficking and abuse.
The HIDTA designation will allow Westmoreland County... 
Now that domestic COVID infection rates are falling, the country is beginning to reopen, and market volatility has subsided, it’s time to look ahead at what will most likely fill the media headlines in the second half of 2020: The Presidential election.
The stock market is surprisingly President-agnostic over the long term. Whether it is a Democrat or Republican, the President does not have too much direct effect on the stock market and companies learn to adapt quickly to the current regime. But this does not mean that the President does not have any influence over market factors. Presumptive Democratic nominee Joe Biden is much more centric than former liberal contenders Bernie Sanders and Elizabeth Warren, but he still shares some of the same policy directives such as the push for a return to the more progressive tax policies of the Obama administration. Biden has proposed partially reversing the Tax... 
When a pivotal economic event takes place like we are experiencing with the coronavirus pandemic there are certain trends that begin to either arise or quickly accelerate. We think the latter is currently happening with Ecommerce. It is no secret that for many years online shopping has been taking market share from brick and mortar retail. But never before have we seen a scenario where many brick and mortar retails were forced to close shop and deemed “non-essential”, while the large online market places became the essential way for consumers to get the goods they needed. Some could argue that Amazon & Walmart, the two largest Ecommerce retailers, became a staple of national security for their distribution capabilities as citizens are quarantined in their homes.
Much of this gained business is due to many small retailers simply being forced to close for several months, but we think that Ecommerce retailers... 
Federal Reserve Action and Market Volatility
In late March the Federal Reserve established the SMCCF (Secondary Market Corporate Credit Facility) to support credit to employers and provide liquidity for financial markets.
These new credit facilities gave the Federal Reserve the ability to purchase a larger array of financial products than traditional quantitative easing techniques previously allowed. This included the ability to purchase large amounts of investment grade corporate bonds through SPVs (Special Purpose Vehicles).
As shown in the chart above, this action by the central bank had a profound impact on the financial markets. In particular, the creation of these credit facilities caused a peak in volatility in both equity and credit markets.
The long-term impacts of the unprecedented monetary actions will remain to be foreseen. But for now, the Federal Reserve has been able to keep financial markets operating relatively calmly while the world navigates the Coronavirus pandemic.
... 
One central part of our investment philosophy that we constantly preach is owning companies that have strong balance sheets. What this means is that they have limited liabilities including debt on their balance sheets as well as low working capital requirements. We also look for those companies that have large amounts of cash on their balance sheets. When these strong balance sheets are paired with good capital allocating management teams future returns tend to be strong in both up and down markets. Goldman Sachs recently created “strong balance sheet” and “week balance sheet” baskets of stocks with the former outperforming the latter.
2020 Earnings Update
Strict government-imposed restrictions including shelter-at-home policies did not come into place until mid-March across most of the country. This means that the impact to corporate earnings will not be reflected fully in first quarter numbers but more completely in second and third quarter results.
First quarter earnings have so far been fairly solid with most companies reporting results in line with initial expectations. As expected, most companies have been cautious with giving too much insight into what upcoming quarters numbers will look like. Roughly half of S&P 500 companies provided 2020 EPS guidance through the end of February. If early reporters are any indication than many of these companies will continue to not give 2020 guidance or withdraw previous projections.
While poor upcoming numbers are largely already being priced in by investors, the second and third quarter will presumably be a bumpier earnings season as the... 
Reopening of the Economy
The next step as we move through this virus pandemic is the reopening of the economy and a return to normalcy. Although the “reopening” of the economy is talked about as a singular moment where economic activity is resumed, we see it as more of a process that will take place over the next 2-3 quarters. The economy being “open” is one thing, but the return to normalcy is the more difficult time window to predict. It may take years for several aspects of the economy to return to pre-virus conditions. Financial markets, particularly the fixed income market, have likely been changed for a significant period of time on behalf of the unprecedented central bank stimulus taking place across the globe.
The virus has not affected all regions equally and this will not change once economies reopen. Those parts of the country that have a... 
Where We Are in The Life Cycle of COVID-19
Last month we provided a framework for how we believed the COVID-19 life cycle would play out considering current available data and past virus outbreaks keeping in mind different countries progress at different paces.
At that time, we felt the United States was in stage 3, preparing to move to stage 4 of the virus’s life as local transmission began to take hold and sustained government action was taking place. Since then we have seen unprecedented government lockdowns across the country, social distancing/mask requirements, increased urgency on the part of the government to develop nationwide testing, and pharmaceutical companies rushing to find a potential vaccine.
Today we believe we are in the mid-to-latter part of stage 4 where our healthcare system has absorbed the shock from the wave of new virus patients and cases continue to grow. New daily cases... 
Case Growth
COVID-19 cases in the US continue to grow but the encouraging sign is that the case growth rate appears to be slowing down. After reaching a peak on April 4th, shortly after government shutdowns were enacted, new daily cases have been relatively flat. Hopefully as the US continues to follow Italy’s path total cases will also continue to taper off. This slowdown of the virus is key not only for ensuring medical institutions are not overwhelmed but also for being able to reopen the economy.
We continue to monitor these developments and as more information becomes available, we will be sure to keep you informed.
Pat
Commentary Disclosures: Covington Investment Advisors, Inc. prepared this material for informational purposes only and is not an offer or solicitation to buy or sell. The information provided is for general guidance and is not a personal recommendation for any... 
Volatility in Oil Markets
One pocket of the capital markets that has seen elevated levels of volatility is the commodities sector, particularly crude oil products. On the supply side, recent negotiation fallouts have led to a price war being waged between Saudi Arabia and Russia. At a time where output cuts were trying to be reached by OPEC+, two of the largest oil producers on the planet have maxed out their production capacity flooding the market.
The demand side of the shock comes from the halt in economic activity brought on by the virus outbreak and government shutdown. Without people flying, driving, or transporting goods, demand for crude oil and refined products have dropped off the map.
Investors were greeted by headlines this morning of US light crude oil prices hitting 21-year lows at an astonishing $13.99 per barrel. But those watching this front month expiry benchmark should be aware... 
I thought you might find this update helpful to understand the government’s actions to stabilize the economy. Lawmakers finally came together on a bipartisan stimulus package that was signed into law on Friday, March 27th. The $2 trillion dollar stimulus package known as the CARES Act will act as a lifeline for businesses and employees while the government shutdown persists. The graphic below breaks down the different buckets of the package and how funds are being distributed.
On top of support for large and small businesses, the bill also provides support for hospitals and drug makers that are working to fight and contain the virus. Details are still being provided on the logistics and timing of payments and programs, but officials have been adamant about rolling these out as soon as possible.
The CARES Act is just one aspect of the measures currently being taken to minimize the damage from the... 
Now is the time to look forward and stick to a plan of action. Virus pandemics have a lifecycle that they go through and just like every life cycle they are not exact but can be useful as a timing tool. This framework is important for us as we navigate this volatility and make tactical investment decisions. Our timing will never be exact but what is important is that we are not basing our investment decisions on panic rather than sticking to realities and our core investment philosophy.
The current coronavirus cycle is broken down into 5 stages. Right now, we are crossing over from stage 2 to 3. After the initial spotty cases across the country now we are seeing person to person transmission and the number of total cases to expand dramatically. Our transmission rates have been on par with other countries, but our mortality rate is significantly... 
Peak in Global Infection Rate
Worldwide infection numbers continue to grow as most of the world remains in shutdown. The service sector has been especially badly affected, with consumer facing industries bearing the brunt of the social distancing measurements. Although domestic health centers are strained, they have not been overrun such as those in Italy or Wuhan, China.
It’s not all doom and gloom, positive signs are popping up in pockets across the world.
In an encouraging sign, Italy has reported three straight days of new cases below the peak of 6,557 which occurred on March 21st. Saturday was 16 days since Italy took more drastic measures of social distancing such as shutting schools, universities, and non-essential businesses. China reached peak reported numbers 12 days after taking such measures. This would mean that we can use this 12-16 day window as a rough guide for a peak in the United... 
Day to day the media is reminding you to wash your hands and avoid large crowds as new coronavirus cases pop up across the world. What they should also be discussing is what else you should be concerned about; your cybersecurity. Global disasters such as the coronavirus creates a golden opportunity for fraudsters because the whole world is informed and constantly trying to learn more about said disaster. This causes a greater potential for impulse clicking on suspicious emails or attachments. The fraudsters know this. Starting in February 2020, a new coronavirus phishing scam has popped up in the United States. So, not only do you have to worry about the coronavirus outbreak hitting your area but now you must be on the lookout for the latest e-mail scam! These scam artists are trying to prey on the fear of the outbreak, hoping that you’ll impulse click on their seemingly... 
Peak in Global Infection Rate
Cases from around the globe continue to grow as widespread testing is being rolled out. To track the trajectory of the virus we are watching how fast the infection grows in a country after the number of cases exceed 100. China began to stabilize after roughly 36 days. When excluding Hubei, the epicenter of the Virus outbreak, this stabilization came even earlier at around 26 days. Although we try using other countries that are further along in their timeline as precedents it is important to keep in mind that not all countries are following the same trajectory. Italy, for example is experiencing rapid spread of the virus stemming from cultural norms such as tight living conditions and an aging population. South Korea has already flattened their curve by extensive testing and quarantine measures.
Coordinated Stimulus
Over the weekend the senate failed to come together on... 
A Peak in Global Infection Rates
This is the most important factor for sensing a market bottom but also the most difficult to predict because of the uncertain nature of viruses. Using available data and models we can estimate the timeframe that it takes for a country to reach its peak infection rate and then flatten out.
Many governments around the world believe the virus will peak in June or July but using China as an example we believe that peak could occur even earlier as long as countries take the necessary precautions to curb the spread of the virus. Every country has different circumstances. Italy for example has not been effective at stopping the virus and an aging population has made the mortality rate especially high. On the other hand, South Korea has shown the ability to stem the spread of the virus in an outstandingly quick timeframe through... 
How do we navigate this unprecedented market environment? While the circumstances of the Coronavirus/Oil War are extraordinary we are in the midst of a major crisis. Simply put, in a crisis there are certain actions we must adhere to as long-term investors until this crisis passes. We use historical precedents as a guideline, but every crisis is different. What isn’t different is how we approach them. This is not a time to be frequently trading long term positions locking in losses under irrational circumstances. Once the virus hysteria passes, events and gatherings return to normal, and fiscal stimulus is launched by the government the market will stabilize. The stock market rewards investors who are long term oriented. While others are selling their shares out of panic, it creates an opportunity for those who want to buy a stake in those companies with the mindset of a long-term part-owner. Stocks of... 
I’d like to share with you yesterday’s insights from Schwab Chief Investment Strategist Liz Ann Sonders in response to the economic implications of the COVID-19 and the recent crash in oil prices.
Covington Investment Advisor Disclosures:
The information contained in this commentary has been compiled by Covington Investment Advisors, Inc. from sources believed to be reliable, but no representation or warranty, express or implied, is made by Covington Investment Advisors, Inc., its affiliates or any other person as to its accuracy, completeness or correctness.
Under no circumstance is the information contained within this correspondence to be used or considered as an offer to buy or sell or a solicitation of an offer to buy or sell any particular security. Nothing in this correspondence constitutes legal, accounting, or tax advice or individually tailored investment advice, or research. This material is prepared for general circulation to clients, and... 
The current scene of volatility in the markets is one that we do not take lightly or underestimate the degree to which financial markets can work themselves into a panic. We understand that the current selloff this past week is difficult to endure. Based on our financial planning and investment management approach our client portfolios have been designed for every possible environment, good or bad. Fortunately, our portfolios are designed to prepare for such circumstances as we are currently experiencing. You have a financial plan that has incorporated an emergency fund of cash representing 6-12 months of cash needs so that you would not be forced to sell assets at the wrong time. Our yield bias of dividend paying stocks provides ongoing cash flow support and our focus on large capitalized proven enterprises has proved to be protective in these environments as well. Our total avoidance of international and emerging... 
The recent outbreak of the Wuhan Coronavirus is a topic that is at the forefront of all investors’ minds, particularly since information out of China is spotty and the numbers that are supplied by the Chinese government need to be met with high scrutiny. Many would wonder how the world’s second largest economy seemingly grinding to a halt would not cause a market sell off. The market reaction thus far has been relatively muted for several reasons:
The first reason is the derivative effects of the virus that the market is currently pricing in. The market is confident that China will be able to relatively contain the virus before it becomes a full-on Global Pandemic. From what we know now, the mortality rate from Coronavirus is relatively low. Figure 1, located below, plots the Coronavirus mortality statistics against similar outbreaks. As this is being written, only two deaths have been... 