Weekly Market Notes – September 28, 2020

For the Week of September 28, 2020

The Markets

It was a choppy week on Wall Street as investors weighed rising coronavirus cases, the upcoming presidential election, and uncertainty over another stimulus bill. Although stocks closed on a high note on Friday, the Dow and the S&P posted four-week losing streaks. But tech shares recovered some of their September declines, giving the NASDAQ its first weekly gain in four weeks. For the week, the Dow fell 1.75 percent to close at 27,173.96. The S&P lost 0.61 percent to finish at 3,298.46, and the NASDAQ gained 1.13 percent to end the week at 10,913.56.

Returns Through 9/25/201 WeekYTD1 Year3 Year5 Year
Dow Jones Industrials (TR)-1.75-3.073.189.3513.47
NASDAQ Composite (TR)1.1322.4836.4320.9119.73
S&P 500 (TR)-0.613.5312.6411.9013.58
Barclays US Agg Bond (TR)-0.096.837.435.144.26
MSCI EAFE (TR)-4.21-8.48-0.820.234.77
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

The Day the World Changed — The World Health Organization declared the COVID-19 outbreak a pandemic on March 11. In the six months from March 11 through Friday, Sept. 11, the S&P 500 had gained 23 percent (total return) (source: BTN Research).

Plan for Price Increases — As of Aug. 31, the consumer price index was up 19 percent over the last 10 years, up 50 percent over the last 20 years, and up 98 percent over the last 30 years. The consumer price index is a measure of inflation compiled by the U.S. Bureau of Labor Studies (source: Department of Labor, BTN Research).

Just Five Years — 55 of the last 60 fiscal years in our country have resulted in outlays exceeding receipts. The five surplus years were 1969, 1998, 1999, 2000, and 2001 (source: Office of Management and Budget, BTN Research).

WEEKLY FOCUS – Women’s Retirement Challenges

Although the pandemic has made financial disparities between men and women more pronounced, women have long faced greater challenges in retirement than men, for multiple reasons.

Longevity: On average, American women live five years longer than men. According to recent CDC data, males typically live to be 76, while women reach the age of 81. So while wives are frequently caregivers for their husbands, they may have no one to provide help when they need it. It’s no wonder women account for more than 70 percent of nursing home residents.1 In addition to potentially greater long-term care expenses, longer lives result in increased general healthcare costs.

Pay gap: According to the most recent Census data from 2018, women still earn 82 cents for every $1 their male counterparts earn. Multiple reasons account for the disparities; one significant factor is the types of careers many women traditionally pursue.

Savings gap: Clearly, it’s harder to save when you earn less. But women are typically primary caregivers for children and aging parents as well – creating employment gaps in their careers. This not only impacts their personal savings and career advancement, it also affects their Social Security benefits, which are based on a worker’s top 35 years of indexed earnings.

Dependency: According to Boston College’s Center for Retirement Research, 46 percent of married women in their 50s living in a two-income household are at risk of not being able to maintain their standard of living during retirement. Possible explanations are many two-income households spend more, and frequently, only one spouse is covered by a company retirement plan. Furthermore, a recent UBS survey reports 58 percent of high-net-worth married, divorced, or widowed women defer long-term financial decisions to their spouses or ex-spouses.2

COVID: Recent school and daycare closures impacted women harder than men. And social distancing particularly hits women, who often work in service industries, own small retail businesses, or work part-time (with fewer safety nets).

The good news is, an awareness of these challenges can drive women to gain knowledge, take control of their situation, and save and invest well. Whether you are a single or married woman, we’ll make sure you have the knowledge you need to address your unique challenges and plan for a more secure retirement. 

1https://www.investmentnews.com/long-term-care-womans-issue-192447

2https://www.forbes.com/sites/nextavenue/2019/07/10/the-women-facing-the-greatest-retirement-risk/#57443c5773fb

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright September 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#3259197.1

Weekly Market Notes – September 21, 2020

For the Week of September 21, 2020

The Markets

The major stock indices fell Friday, contributing to their third straight weekly loss. Investors demonstrated concern over uncertainty about an additional round of stimulus legislation, new tensions with China, and steep declines of big tech stocks. For the week, the Dow fell 0.01 percent to close at 27,657.42. The S&P lost 0.60 percent to finish at 3,319.47, and the NASDAQ dropped 0.53 percent to end the week at 10,793.28.

Returns Through 9/18/201 WeekYTD1 Year3 Year5 Year
Dow Jones Industrials (TR)-0.01-1.354.349.9413.78
NASDAQ Composite (TR)-0.5321.1133.2819.9318.76
S&P 500 (TR)-0.604.1712.5312.0213.41
Barclays US Agg Bond (TR)-0.096.937.855.244.23
MSCI EAFE (TR)0.79-4.462.731.755.02
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

Mostly Mortgage Debt — Total household debt in the United States was $14.27 trillion as of June 30, down slightly from the all-time record of $14.30 trillion set as of March 31. 69 percent of the $14.27 trillion household debt total ($9.78 trillion) is mortgage debt (source: Federal Reserve Bank of New York, BTN Research).

Some Relief — A maximum $2,500 of interest expense from student loans is deductible annually from taxable income. Consult a tax expert for details (source: Internal Revenue Service, BTN Research).

All Stocks — The total stock market capitalization of U.S. equities peaked at $36.1 trillion as of Feb. 19, fell to $23.4 trillion as of March 23, and has bounced back to $35.6 trillion as of Friday, Sept. 11 (source: Wilshire, BTN Research).

WEEKLY FOCUS – When You Inherit an IRA

When you lose a loved one, your first thoughts won’t be about what to do with their IRA. But if you’re a beneficiary, it is important to make wise decisions to avoid excess taxes and penalties. Due to changes to the beneficiary rules in the SECURE ACT, the following information applies to deaths on or after January 1 of this year.

Everyone: Any beneficiary can take all the account assets as a lump sum payment without incurring a 10 percent early withdrawal penalty. However, if it’s a traditional IRA, you’ll pay income taxes on the amount distributed, which might push you into a higher tax bracket. And if it’s a Roth IRA that is less than five years old, you’ll owe taxes on the earnings. If the benefactor was over the Required Minimum Distribution (RMD) age, you will need to determine whether the benefactor took their RMD for the year they died. If they didn’t, you must do so before the end of the calendar year or incur a 50 percent penalty on the RMD amount.

A surviving spouse: A surviving spouse has the most options.You can designate yourself as the owner of your spouse’s account, transfer the funds into your own IRA, or open an inherited (or stretch) IRA. With the latter, RMD amounts will be based on your age and be recalculated each year based on the factors in the IRS Single Life Expectancy Table.

Other eligible designated beneficiary: If you’re a minor, chronically ill, disabled, or less than 10 years younger than the deceased, you may open a stretch IRA described above. When minors reach the age of majority, the ten-year distribution rule applies.

Another relative or friend: If you don’t fall into the categories above and don’t choose to take a lump payment, you will need to create an inherited IRA account and transfer the funds. You won’t be allowed to make new contributions to the account. There are no annual required distributions, but you must withdraw all the money within 10 years.  

COVID exceptions: Because of COVID, all RMDs have been suspended for 2020. This waiver includes inherited accounts. Consult with your tax advisor regarding the impact of COVID-related legislation on the ten-year liquidation requirement.

This brief article doesn’t cover all the rules and options regarding inherited retirement accounts. But we would be happy to explain different possibilities and their ramifications, and work with your attorney and accountant to guide you through any decisions you may face. Consult your tax advisor regarding your own unique situation.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright September 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 3249384.1

Weekly Market Notes – September 14, 2020

For the Week of September 14, 2020

The Markets

Stocks ended Friday’s volatile session mixed; the NASDAQ ended lower while the S&P and Dow Jones rose. The three major indices all posted steep losses for the week. The NASDAQ experienced its worst weekly decline since March. For the week, the Dow lost 1.61 percent to close at 27,665.64. The S&P dropped 2.49 percent to finish at 3,340.97, and the NASDAQ fell 4.06 percent to end the week at 10,853.54.

Returns Through 9/11/201 WeekYTD1 Year3 Year5 Year
Dow Jones Industrials (TR)-1.61-1.344.4410.4013.71
NASDAQ Composite (TR)-4.0621.7634.1520.3018.92
S&P 500 (TR)-2.494.8013.4912.5113.52
Barclays US Agg Bond (TR)0.257.037.755.164.32
MSCI EAFE (TR)1.45-5.212.401.504.97
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

Cheap Money — The yield on the 10-year Treasury note closed at 0.695 percent on Aug. 31, down from 1.91 percent as of Dec. 31. The all-time low close for the 10-year note is 0.501 percent set on March 9 (source: Treasury Department, BTN Research).

Need More, Not Less — The suppliers of lumber cut their production in the first quarter of 2020 as the pandemic was developing in anticipation of a slowing housing market. Instead, an increased demand for home building and renovation projects has pushed the price of lumber to an all-time record price of $858 per thousand board feet, up 111 percent from a price of $406 per thousand board feet at the end of 2019 (source: CME Group, BTN Research).

The Most Paid — The maximum Social Security benefit paid to a worker retiring at full retirement age in 2020 is $3,011 per month, triple the $975 per month maximum benefit paid 30 years ago (source: Social Security, BTN Research).

WEEKLY FOCUS – National College Savings Month

Over the last four decades, the price of a college education has grown disproportionately to other costs. During the 1978-79 school year, it cost today’s equivalent of $8,250 to attend a public university and $17,680 to attend a private university. Now, a year at a public school averages $21,370, and a private college runs $48,510 a year.1 It’s no wonder Americans owe $1.5 trillion in student debt.2  Clearly, saving early and wisely has never been more important. Here are a few avenues to consider.

529 Plan: This qualified tuition plan was created to allow families to save money for future education without paying federal taxes on its growth – as long as it is used for qualified higher-education expenses. (The Tax Cuts and Jobs Act now allows families to use funds toward a private elementary or secondary education as well.) If the original beneficiary doesn’t need the funds for education, the beneficiary can be changed to another family member. Balances can’t exceed the beneficiary’s expected educational expenses. Many states offer a tax credit or deduction for contributions, often limited to their own state’s plan.

There are two types of 529s. A 529 Prepaid Tuition Plan locks in the current price for a block of tuition at a specified list of schools. With the more flexible and popular Education Savings Plan, funds go into an investment account.

UGMA/UTMA Account: Adults can easily make irrevocable gifts to a minor with these custodial accounts. Earnings are usually taxed at the child’s lower rate. The beneficiary must be given control of the account when they turn 18 to 25, depending on the state. Since the child owns the account, the assets may impact the student’s financial aid.

Coverdell Education Savings Account: Like 529 Plans, contributions are not deductible and distributions aren’t taxed. However, these plans are more restricted as individuals or couples who wish to open an account must meet income guidelines, and annual contributions cannot total more than $2,000 per beneficiary from all contributors.

This brief overview doesn’t cover all the rules and considerations of these accounts or other options. If you’d like to learn more or need help planning for a child’s or grandchild’s education, please call our office.

1https://www.cnbc.com/2019/12/13/cost-of-college-increased-by-more-than-25percent-in-the-last-10-years.html2https://www.marketwatch.com/story/americans-save-a-record-352-billion-for-college-in-529-plans-why-thats-not-necessarily-a-good-thing-2019-09-27

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright September 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 3239947.1

Weekly Market Notes – September 8, 2020

For the Week of September 8, 2020

The Markets

Despite August’s positive jobs report, stocks fell Friday, and the three major indices saw steep declines for the week. The S&P experienced its worst day in nearly three months. For the week, the Dow fell 1.73 percent to close at 28,133.31. The S&P lost 2.27 percent to finish at 3,426.96, and the NASDAQ dropped 3.25 percent to end the week at 11,313.13.

Returns Through 9/04/201 WeekYTD1 Year3 Year5 Year
Dow Jones Industrials (TR)-1.730.279.3211.1414.57
NASDAQ Composite (TR)-3.2526.9143.2421.9520.61
S&P 500 (TR)-2.277.4818.9413.6414.57
Barclays US Agg Bond (TR)0.156.766.115.134.24
MSCI EAFE (TR)-0.92-5.492.871.695.23
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

All This During a Pandemic — The median sales price of existing homes sold in the United States was $304,100 in July 2020, the first time in U.S. history that the median sales price has exceeded $300,000. The $304,100 median price is also a record on an inflation-adjusted basis, besting the $230,200 median sales price from July 2006, equal to $293,096 in 2020 dollars (source: Nat’l Association of Realtors, BTN Research).

Money to Help — The Economic Impact Payments of $1,200 per adult and $500 per child (under the age of 17) that were part of the CARES Act were the third time the government has issued direct stimulus payments in the last 20 years. The previous payments were made in 2001 and 2008 (source: CARES Act, BTN Research).

Our Number — As of June 30, the U.S. government’s debt-to-GDP ratio was 137 percent, i.e., $26.5 trillion of government debt divided by our $19.4 trillion economy (source: Treasury Department, BTN Research).

WEEKLY FOCUS – Things to Know About Life Insurance

September is Life Insurance Awareness Month, making it a good time to review things you may not know about life insurance, such as:

Policies differ widely. Term life insurance pays out a death benefit if you die within the specified period, often 20 or 30 years. Because it only pays for untimely deaths, it is less expensive. Permanent policies, whole or universal, cost more than term insurance because they cover the insured during their entire life (as long as premiums are paid) and include a savings component.

Whole life offers a guaranteed cash value and fixed premiums. A universal policy allows you to change the death benefit and to increase, decrease, or stop premiums (provided you maintain a sufficient cash balance to cover the insurance cost). You can take a loan or a withdrawal from the cash portion of both permanent policies. Beneficiaries will not receive money left in the cash portion of either policy when you die.

People overestimate costs. Most people think life insurance costs much more than it does. Particularly if you purchase a policy when you’re young, term insurance can be surprisingly affordable. On average, a 30-year-old male can get a $250,000, 20-year term life policy for around $150 a year. Even if he waits until turning 50, the average policy is only $465 a year.*

You may qualify with health conditions. Many people assume they can’t get life insurance if they have a pre-existing condition. This is often not the case, although extra screening might be required, and you may pay higher premiums. However, providing proof that a condition – such as high blood pressure, high cholesterol, or anxiety – is being managed effectively can improve your risk assessment.

Riders can add options. Riders are additional benefits that can be added to a basic policy. Some of the more common cover long-term care costs, let an insured use death benefits during a terminal illness, allow the insured to increase coverage without additional medical testing, or waive premiums if disability causes the insured to lose their income.

Please contact our office if you need help evaluating how much life insurance you need or determining whether your current coverage is adequate. We can handle your insurance needs at our office, work with your existing insurance agent, or recommend an agent to work with you.

*https://www.nerdwallet.com/blog/insurance/average-life-insurance-rates/

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright September 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#3232113.1

September 2020 Monthly Outlook – Dog Days of Summer

Historically, August is the 2nd worst month for the stock market.  Yet again 2020 proved to be an unprecedented year. We just had the best August for stocks since 1984.     Having said that, I am still concerned about the lack of breadth in the market.  While the S&P 500 Index has made a new all-time high, only 13% of S&P stocks are making all-time highs, while 50% of the stocks have made no gains in 2 years (source: CNBC/Carter Worth).  Even worse, some 29% of S&P stocks are actually down 20% YTD (source: BTN Research).

An additional worry is that the stock market seems completely detached from the economy.  While we did see a significant economic rebound in June, with most states re-opening, the pace of the rebound in July and August slowed.  This is can be seen in employment as weekly new unemployment claims rose back above 1 million and we still have some 15 million people still out of work.  Potentially more impactful is that an estimated 33% of the pandemic-driven layoffs in the United States that occurred from March through May will be permanent, i.e., the workers will never return to their old jobs at their former employers (source: Brookings Papers on Economic Activity, BTN Research). That 33% equates to roughly 9 million jobs.

The Conference Board Leading Economic Index® (LEI) for the U.S. Increased in July Despite improvement, pace of economic growth will likely weaken in final months of 2020 “The US LEI increased for the third consecutive month in July, albeit at a slower pace than the sharp increases in the previous two months,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Despite the recent gains in the LEI, which remain fairly broad-based, the initial post-pandemic recovery appears to be losing steam. The LEI suggests that the pace of economic growth will weaken substantially during the final months of 2020.”

Much of the government support provided earlier this year expired at the end of July and Congress has returned to their partisan bickering. While I do expect them to get to an agreement, the longer they delay the more long lasting the negative effect on the economy.

So what’s ahead for us in September.  Well, we are getting into the heart of election season, which means increased volatility.  The economic recovery is slowing down and the economy is still well below its pre-Covid level. September is traditionally a poor month for stocks.  However, 2020 has proven to be about as unpredictable as any year in history.  We also have the Federal Reserve which is committed to doing what it takes to support the economy. As show in the chart below, September tends to be a weak month. In fact, it is the weakest month on average since 1950. Additionally, the last two times August was up more than 5% were 1986 and 2000; the S&P 500 fell 8.5% and 5.4% in September those years.

Our approach is to remain invested but take some profits in some of the big winners, offsetting some of the declines from earlier this year.  We are keeping equity allocations in line with your overall risk tolerance but we are making some shifts between industries/sectors.

P.S. Thank you for your referrals. They are making a big difference in my practice. Feel free to share my name with your friends on Facebook or LinkedIn.

I want to extend a special thanks to clients & colleagues who have recently referred us to family and friends:   Steve K.,  Dave P., Dennis A. 

September Calendar of Events   (comments and additions for future months are always welcome)

  • September is National Suicide Prevention month – let’s look out for friends and loved ones having a hard time in 2020

Sep 7th             Labor Day

Sept 11th          Patriot Day- honoring those who lost their lives on 9/11/01

Sept 18th          Rosh Hashana begins – wishing all our family, friends, and colleagues of the Jewish faith Shanah tovah um’tukah

Sept 22nd         Autumn begins – let’s pray it doesn’t include a bad flu season

Sept 27th          Yom Kippur- Chag Sameach

Best regards,

Jim

Sources:  LPL Research, Bloomberg, CNBC

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

Weekly Market Notes – August 31, 2020

For the Week of August 31, 2020

The Markets

Stocks rose Friday. The Dow erased its losses for the year, and the NASDAQ and the S&P reached new record closes. July’s U.S. consumer spending encouraged investors, along with the Federal Reserve’s announced policy shift to allow inflation to run higher. For the week, the Dow rose 2.64 percent to close at 28,653.87. The S&P gained 3.29 percent to finish at 3,508.01, and the NASDAQ climbed 3.40 percent to end the week at 11,695.63.

Returns Through 8/28/201 WeekYTD1 Year3 Year5 Year
Dow Jones Industrials (TR)2.642.0312.7412.1214.22
NASDAQ Composite (TR)3.4031.1750.3424.3020.68
S&P 500 (TR)3.299.9723.8615.0414.32
Barclays US Agg Bond (TR)-0.516.606.125.084.27
MSCI EAFE (TR)1.69-4.587.392.354.60
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

Find a New Job — An estimated 33 percent of the pandemic-driven layoffs in the United States that occurred from March through May will be permanent, i.e., the workers will never return to their old jobs at their former employers (source: Brookings Papers on Economic Activity, BTN Research).

It Will Take Time — Economists from the second largest bank in the United States predict the U.S. economy will not recover to its pre-pandemic level until early 2023 (source: Bank of America, BTN Research).

When Demand Drops — In 2019, the world production of crude oil was 101 million barrels a day. The pandemic caused a global collapse in oil consumption, forcing the major oil players of OPEC and Russia to implement an output cut of 9.7 million barrels a day in April. The drop in demand forced U.S. oil producers to cut output by 2.4 million barrels a day since mid-March (source: U.S. Energy Information Administration, BTN Research).

WEEKLY FOCUS – Credit Card Companies Respond to COVID

In these unprecedented times, many companies are coming up with new ways to help those who have experienced economic challenges and to better serve customers whose lifestyles have been altered because of health concerns. Credit card companies are no exception.

Many major credit card companies have added to their existing hardship programs to help customers in financial stress due to the coronavirus. On a case-by case basis, a variety of measures may be approved, such as deferred or lower monthly payments, waived interest and late fees, or increased credit limits.

Consumers who have always guarded their credit rating may worry about asking for a deferment. But if a company agrees to defer your payments, it won’t report those payments as late. However, your credit score could still be damaged if a card balance grows while payments are deferred. So, it’s best to discuss reporting concerns with the company.

If you have overdue payments because of COVID, file a consumer statement with the credit bureau explaining the unique circumstances that led to falling behind and your intention to catch up as soon as possible.

Credit bureaus are also stepping up by allowing consumers to check their credit report once a week at no cost through April of 2021 at AnnualCreditReport.com.

Even if you haven’t experienced income loss this year, you may want to take advantage of other limited time benefits from some credit cards. Among these are:

  • giving extra points for restaurant, grocery, or gas purchases
  • allowing holders to redeem travel points at grocery stores and restaurants
  • providing statement credits for grocery or restaurant delivery services
  • offering statement credits for streaming entertainment, wireless phone, or shipping services

To see what your credit card offers, visit its website or call customer service. As with any form of credit, responsible use is crucial. Making your money go farther and protecting your assets are important to us. We can help you evaluate your options for spending, saving, and investing your money to support your financial goals.

*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright August 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 3222715.1

Weekly Market Notes – August 24, 2020

For the Week of August 24, 2020

The Markets

Stocks rose Friday, and the NASDAQ and the S&P achieved record closing highs as several pieces of positive news encouraged investors. New reports showed better than expected corporate earnings reports, a surge in home sales and accelerated manufacturing activity. For the week, the Dow rose 0.09 percent to close at 27,930.33. The S&P gained 0.77 percent to finish at 3,397.16, and the NASDAQ climbed 2.69 percent to end the week at 11,311.80.

Returns Through 8/21/201 WeekYTD1 Year3 Year5 Year
Dow Jones Industrials (TR)0.09-0.599.1711.3613.89
NASDAQ Composite (TR)2.6926.8542.4423.3920.50
S&P 500 (TR)0.776.4718.4414.0613.79
Barclays US Agg Bond (TR)0.277.147.245.314.25
MSCI EAFE (TR)-0.99-6.174.842.034.15
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

There’s Bad, Then There’s Awful — The U.S. economy fell 10 percent in size between March 31 and June 30. The United Kingdom’s economy fell 20.4 percent in size between March 31 and June 30 (source: Office for National Statistics, BTN Research).

Need a Lot of Money — The U.S. government forecasted on Monday, Aug. 3, that it will borrow $4.5 trillion during fiscal year 2020, i.e., the 12 months ending Sept. 30. That total exceeds the $3.8 trillion borrowed over the previous four fiscal years of 2016-2019 (source: Treasury Department, BTN Research).

Being Cautious — The personal savings rate in the United States was a record 33.5 percent in April as Americans reacted to the COVID-19 pandemic outbreak. The personal savings rate in the United States was 7.5 percent in April 2019. The personal savings rate is defined as savings (i.e., after-tax income less consumption spending) divided by after-tax income (source: Department of Commerce, BTN Research).

WEEKLY FOCUS – Keeping Your Eyes on the Goal

As the struggle to control COVID-19 drags on, many of us experience periodic fatigue from distancing, negative headlines and future uncertainties. Staying disciplined when weary is difficult but crucial to short-term financial wellness and long-term financial success. So, follow these guidelines to maintain your focus:

Don’t fixate on market swings. If you have a solid strategy that addresses market volatility, do the right things regardless of how the market acts. That’s not to say you shouldn’t regularly reevaluate your risk levels or consider rebalancing your portfolio, but don’t make decisions based on emotion. And don’t try to time the market; few who do succeed.

Invest prudently. The natural human tendency is to buy lots of stock when prices are rising and to stop buying altogether when prices are on the down swing. But some stock prices may provide a good value if the market drops, and you’ll be able to buy more for the same amount of money. Just remember, it’s generally best not to purchase equities unless you can keep them a minimum of five years.

Thinking about purchasing a different home in a year or two? This may be a good time for some improvement projects on your current home. Most realtors agree you’ll likely recoup these investments: a new garage or front door, a minor kitchen remodel, finishing a basement or updating a bathroom.

Increase your savings. When we’re stressed, it’s natural to buy something fun. But try to keep splurges small and make the most of unique opportunities to save in the current situation. If you’re working from home, you’re likely spending less on gas and clothes. In your free time, you’re probably spending less on dining out, movies, concerts and travel. Try to see how much more you can put in savings because of reduced spending.

Use your time wisely. Improve your culinary skills and reap rewards for years to come as you save on prepared food costs, eat healthier and entertain economically. Earn a professional certification or take a class to improve your desirability as an employee. Or, develop skills and a network to start a business or side gig.

Even difficult times can present real opportunities. If you’re looking for or considering ways to thrive in the midst of the pandemic’s economic fallout, give our office a call.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright August 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 3213534.1

Weekly Market Notes – August 17, 2020

Weekly_Market_Notes

For the Week of August 17, 2020

The Markets

Stocks ended mostly flat on Friday, with the S&P still failing to achieve a record high. The market appeared to be treading water as investors reacted to modestly improving retail sales and stalled stimulus talks as the Senate adjourned for its August recess. For the week, the Dow rose 1.87 percent to close at 27,931.02. The S&P gained 0.69 percent to finish at 3,372.85, and the NASDAQ climbed 0.09 percent to end the week at 11,019.30.

Returns Through 8/14/20 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 1.87 -0.68 12.29 10.86 12.54
NASDAQ Composite (TR) 0.09 23.53 43.13 21.50 18.20
S&P 500 (TR) 0.69 5.66 21.07 13.22 12.29
Barclays US Agg Bond (TR) -0.91 6.85 7.08 5.29 4.32
MSCI EAFE (TR) 2.46 -5.23 7.33 2.27 3.39

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

 

Tough Year — The number of operating oil rigs in the U.S. (both on land and offshore) as of last Friday, Aug. 7, was 247, down 69 percent from 805 operating oil rigs as of Dec. 31, 2019 (source: Baker Hughes, BTN Research).

Reducing Your Monthly Cost — 64 percent of mortgage applications filed during the week ending Friday, July 31, were current homeowners refinancing existing mortgage debt as opposed to new home purchases (source: Mortgage Bankers Association, BTN Research).

Record Low — The yield on the 10-year Treasury note closed at 0.514 percent last Tuesday, Aug. 4, 2020, within 0.013 percentage points of its all-time record low close of 0.501 percent from March 9, 2020 (source: Treasury Department, BTN Research).

 

WEEKLY FOCUS – The Mixed Blessing of Longevity

Thanks to better nutrition, smarter health choices and medical advances, people now live longer. The average life expectancy for a newborn in 1950 was 68. Today, it is just short of 79.1 And according to the Social Security Administration, one in four 65-year-olds will live past 90 and one in ten will live past 95.2

Realizing your retirement could last 25 or 30 years is the first step to prepare financially – ideally, starting in your youth to reap maximum rewards of compound growth. Suppose, for example, you begin saving $475 per month when you’re 22 and earn an average annualized return of 8 percent. When you’re 67, you’ll have a $2,379,328 retirement fund. Wait until you’re 42, and that nest egg will only be $450,040.But don’t dismay if youth has passed. There is still a lot you can do, such as:

Continue working. If you can, keep working beyond the typical retirement age. This will help you accumulate more wealth, delay using savings and postpone drawing Social Security to let your benefits grow. If you retired early this year because of COVID risks, take heart. The pandemic has also increased remote work opportunities. Consider tutoring, customer service, sales, accounting, tech support or administrative work, just to name a few.

Protect your health. It’s no secret healthcare costs have grown disproportionately. It’s estimated the average couple will need $295,000 for medical expenses in retirement (not counting a potential need for long-term care).4 So, anything you can do to safeguard your health is bound to pay off in quality of life and financial savings.

Invest wisely. Although inflation has been low since the 2008 recession, it still adds up over time. Keeping all your money in overly low-risk (and likely low return) investments may not actually be wise over the long-term. Particularly in a low-interest environment, it’s difficult to grow ultra-low-risk investments. Investing a portion of funds you won’t need for a decade or more in the market provides growth potential while giving you more time to ride out market volatility.

Whatever your age, there are always ways to improve your situation. If you’d like help creating or reviewing a written strategy for retirement saving, investing or distribution, contact our office today.

1https://www.macrotrends.net/countries/USA/united-states/life-expectancy#:~:text=The%20current%20life%20expectancy%20for,a%200.03%25%20decline%20from%20201

2https://www.cnbc.com/2018/01/12/failing-to-plan-for-longevity-can-hurt-your-finances.html

3https://blog.massmutual.com/post/swp-save-retirement

4https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright August 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 3204664.1

Weekly Market Notes – August 10, 2020

Weekly_Market_NotesFor the Week of August 10, 2020

The Markets

Stocks were mixed Friday, thanks to a slightly better-than-expected July jobs report and gridlock between Democratic leaders and the White House over the next stimulus package. In other news, the Trump administration placed sanctions on 11 government officials in China and Hong Kong, and the President issued restrictions on Chinese social networks TikTok and WeChat in the U.S. over security concerns. For the week, the Dow rose 3.88 percent to close at 27,433.48. The S&P gained 2.49 percent to finish at 3,351.28, and the NASDAQ climbed 2.51 percent to end at 11,010.98.

Returns Through 8/07/20 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 3.88 -2.50 8.17 10.02 12.27
NASDAQ Composite (TR) 2.51 23.42 41.50 21.21 18.21
S&P 500 (TR) 2.49 4.93 18.54 12.75 12.30
Barclays US Agg Bond (TR) 0.10 7.83 8.56 5.65 4.48
MSCI EAFE (TR) 1.95 -7.50 3.95 0.97 2.61

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond, NASDAQ and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. (TR) indicates total return. MSCI EAFE returns stated in U.S. dollars.

 

They Will Have to Cut Back — An estimated 55 percent of working-age households today are not saving enough money before retirement to allow them to maintain their current standard of living into their retirement years (source: Center for Retirement Research, BTN Research).

Spending Spree — Since cutting short-term interest rates to near zero on March 15, the Fed has purchased $1.7 trillion of Treasuries through Wednesday, July 29. The Fed now owns $4.3 trillion of U.S. government debt or 25 percent of the total Treasury securities outstanding (source: Treasury Department, BTN Research).

Bumpy Skies — The March 27 CARES Act allocated $25 billion to 11 U.S. airlines to be used for the payroll and benefits of the individual airline companies. The legislation prohibits the 11 airlines that received CARES Act money from implementing any layoffs until Oct. 1 (source: CARES Act, BTN Research).

 

WEEKLY FOCUS – Things You Can Do With a 401(k) but Not an IRA

Each type of retirement account has its own advantages and disadvantages. Today, we’ll look at some things you can do with a 401(k) you can’t do with an IRA, such as:

Lower tax bills, regardless of income. There are income limits for contributing to individual Roth IRAs. There are also income limits for pretax contributions to traditional IRAs if you or your spouse has a work retirement plan. But if you are still employed, you may make pretax contributions to your employer’s 401(k) regardless of your income. And maximum contributions are considerably higher than for IRAs. For 2020, you can contribute $19,500 to your 401(k) if you’re under 50 or $26,000 if you are 50 or older. A potential employer match is an added bonus.

Postpone RMDs. Because of COVID, required minimum distributions (RMDs) are suspended for 2020. Normally, you must begin taking RMDs from a traditional IRA when you reach age 72. But as long as you work the entire year as an employee for the company that sponsors your 401(k) and you or a family member don’t own more than 5 percent of the company, you will not be required to take RMDs from your 401(k).

Take earlier penalty-free withdrawals. Although there is typically a penalty for IRA or 401(k) withdrawals before age 59½, you may take a penalty-free withdrawal from a 401(k) if you are 55 or older and leave your employer. In 2020, you may withdraw up to $100,000 without a penalty regardless of age or employment status for a COVID-related hardship.

Contribute to a Roth, regardless of income. You can contribute to an individual Roth IRA only if your modified adjusted gross income falls below the legal limit. However, more employers are offering Roth 401(k) options. Like a traditional 401(k), there are no income limits for salary deferrals.

Take a loan. While it should be a last resort, you may be able to borrow from your 401(k) if your plan includes a loan provision. If it does, you will likely be required to pay it back in fairly equal payments, including interest, within five years. If you leave your job, you may need to repay it in a very short time.

Just as there are benefits and drawbacks for different types of retirement accounts, there are pros and cons for consolidating accounts. Our office would be happy to help you decide what type of account seems best for your situation or weigh consolidating your existing accounts.

Securities America and its financial professionals do not provide tax advice. Consult a tax professional for specific details.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright August 2020. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 3195903.1

 

 

 

 

 

 

 

 

 

 

August 2020 Monthly Outlook – Running on Faith?

Running on Faith – are stocks discounting too powerful an earnings recovery?

Thanks to the grave uncertainty unleashed by the pandemic, nearly half of S&P 500 companies have withdrawn full-year earnings per share (EPS) guidance; so analysts have been flying a bit blind during the pandemic. About 130 of the S&P 500’s companies have reported second quarter earnings, and while weakness has shown itself in a few areas of the stock market; in general, earnings season has been better-than-expected. But we shouldn’t conflate better-than-expected with strong. Yes, 80% of companies have beaten analysts’ expectations (as per Refinitiv); but the expected decline in earnings for the second quarter is currently -40% (representing the blend of actual results for companies having reported and expectations for subsequent reports). It’s not a stretch—at least from my perspective—to think that the market’s move may be discounting too lofty a coming recovery in earnings.

In terms of valuations, the significant move up off the March 23 S&P 500 low has been a price/earnings ratio (P/E) driven surge; not an earnings-driven surge.  From a recent low of 13.1 on March 23, the forward P/E for the S&P 500 has surged to 21.5. That is getting eerily close to the P/E highs of the late-1990s into the market’s bubble peak in 2000, as you can see in the chart below.

8.3.2020_monthly_outlook_1

Source: Charles Schwab, FactSet, as of 7/24/2020.

 

Too much hype in too few stocks?

The Top 5 have ruled –  Apple, Microsoft, Amazon, Facebook and Google

8.3.2020_monthly_outlook_2

Source: Charles Schwab, Bloomberg, as of 7/24/2020.

 

Because these stocks are so dominating within the S&P 500, the index itself can close significantly higher at the end of a trading day even when most of the index’s stocks are declining. I do think there is a lot of risk of the aforementioned concentration.

The rally off the March 23rd Covid Crash low has been a three-act play.  Act I was led by Tech and Health Care and ran from March 23rd through mid-May.  Act II began when states started opening up again in mid-May and saw a rotation in the market into “re-open” stocks such as airlines, banks and industrial companies.  During Act III that began on June 8th and looks to have ended on July 20th, the S&P 500 was almost exactly flat.  This came during a period of rising Covid case counts around the country that caused “re-open” stocks to fall significantly while Tech and “Covid Economy” stocks led.  Because some of the most notable “Covid Economy” stocks are also the biggest stocks in the world, these names helped prop up the cap-weighted S&P 500 during Act III.  Underneath the surface, however, the market was very weak during Act III with the average stock in the S&P falling 5.7%.  So Act III was essentially a “flat” pullback if you’re looking for a way to describe it at the index level.

8.3.2020_monthly_outlook_3

Another concern is the continuing spread of Covid-19 around the country.  In March it was centered in the Pacific Northwest and the Northeast.  Since May, these areas have seen declines while the Southeast and Southwest have seen major spikes.  In the last couple of weeks, Florida and Texas are finally slowing the spread but now the Midwest is seeing an increase in cases.  Some of the increase in cases is due to better and more testing but clearly the virus is not being contained as states open up.  Perhaps more concerning than the increase in cases is the change in the trend of actual deaths from Covid-19.  As the chart below shows, deaths were on a steep decline from mid-April through mid-July, but have now started to increase alarmingly.

8.3.2020_monthly_outlook_4

These geographically shifting outbreaks of the virus and rising death counts have forced a slow-down of the re-opening of the economy.  This couldn’t come at a worse time as the benefits from the first government stimulus package expired at the end of July and Congress has not been able to agree on additional stimulus.  While I am certain Congress will get some kind of deal done (it would be political suicide to not) the longer they take, the greater the potential the economic recovery stalls out.

We remain cautious at this time but have been using pullbacks to phase back into stocks where appropriate.

 

August 2020 Calendar of Events   (comments and suggestions always welcome)

August is National Immunization Awareness Month – How ironic given the Covid-19 virus and the need for a vaccine.

 

August  8th        My birthday!

August 13th       International Left-Handers Day

August 16th      National Tell a Joke day – we can all use  some humor these days

August 26th       Women’s Equality Day – as the son of a single mom and the father of 3 wonder young women, I support improving equality for women in all areas.

August 26th      National Dog Day – shout out to all the dog lovers out there – woof!

 

Please stay safe and well.

 

Sources:  Charles Schwab, Bespoke Investments, CNBC.com

 

 

 

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

 

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

 

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

 

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.