Calamos on Markets: "Respond to Risk While You Stay Invested"

John P. Calamos Sr.

Given the upheaval in markets since mid-February, many people wonder if they should retreat from their investment portfolios and wait for better days.

“While market conditions are unprecedented, difficult, and likely to stay volatile, from an investment standpoint there are reasons for cautious optimism as I look out longer term,” says John P. Calamos, Sr., Founder of Calamos Investments.

“We’ve seen massive programs put into place by governments and central banks around the world. Also, markets can turn quickly and before the economy is fully recovered, which supports the case for staying invested,” he continues.

The Covid-19 pandemic has created tremendous uncertainty for investors. Although nobody can predict the exact timeline, Calamos remains confident that both the economy and markets will recover.

Throughout history, says Calamos, the global economy and markets have demonstrated resilience through many crises that seemed insurmountable at the time. Countries around the world have responded to the present pandemic with unprecedented global monetary and fiscal policy responses.

Based on his experience of investing for more than 40 years and through multiple crises, Calamos says: “Markets are anticipatory, which makes ‘timing’ a dangerous strategy. Only time will tell if we have already seen a bottom in the markets, and we expect volatility to remain high. However, we caution investors against making panicked moves or trying to time the markets. Just over the past quarter, many securities that had recorded very large losses regained significant ground, but investors who gave into panic likely missed the chance to benefit. Selling during a panic, at lows, when markets are illiquid, will typically lock in your losses.”

Looking out longer term, the strategist further observes: “History tells us that the economy and markets are unlikely to recover at the same pace. Markets are typically forward-looking and have often turned the corner not when problems were fully solved but when things looked ‘less bad.’ We expect better market conditions before the pandemic is resolved and before the economy is fully up and running.”

Calamos Investments thinks many equities and bonds are now oversold and represent compelling long-term opportunities. Still, for those who have grown more worried about volatility and investment portfolios, there are a number of ways investors can potentially “take some risk off the table”—without going to cash. Calamos has developed strategies to help investors cope with volatile markets the company’s founder notes.

“In the difficult financial markets of the 1970s, we pioneered the use of convertible securities to provide potentially lower volatility equity exposure at a time when convertibles were not widely used and were essentially an alternative asset class. Building on this foundational capability, Calamos has introduced a range of liquid alternative strategies that manage risk and returns, with the first in the early 1990s. Calamos’ liquid alternative capabilities include strategies that seek to address the needs of both higher-risk investors who want downside protection in these volatile markets, as well as the needs of low-risk investors who seek income with less risk but find it difficult to generate returns in today’s bond market.”

“As a result of our commitment to risk-managed investment solutions and strong track record, as of March 31, 2020, Calamos is now the largest liquid alternative mutual fund provider, after having broken into the list of the 10 largest providers in 2017,” the Company’s founder concludes.

*Source for AUM data: Morningstar, based on open end U.S. mutual funds.
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