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.