I thought it made sense to do a weekly update on the markets, your portfolio and some of the things we are watching during this time. We want you to know what our thoughts are and how we are positioning our portfolios to address these issues.
You are going to hear a lot of noise from the media that this was “the worst quarter ever for the Dow” and that “the Dow is now back to 2017 levels”, you need to ignore that. You don’t own the Dow. To give you some perspective, our category 3 (moderate risk) portfolio, which is far and away the most popular strategy among our clients, is still positive from January 2019. Remember to go onto our client portal or check your statements to see how you are doing.
As we have said many times before, a key component of being able to ride out a bear market or a steep correction, is a cash cushion. If you have questions or thoughts about the level of cash you have or should have, feel free to reach out to us. As I noted above, given how well the portfolios have held up, it isn’t too late to raise a bit of cash if you will need it for your lifestyle later in the year.
We are still expecting a lot of volatility in the coming weeks as the effects of the virus continue. We also expect to see many more cases as testing becomes more and more prevalent. This is not a bad thing as the more people that are tested, the easier it is to control the spread.
From an allocation standpoint, the hurricane shutters are still up. We are still expecting more wind and rain. Like a hurricane, where the skies open and it is often sunny in the middle of the storm, we expect to see this in the market as well. We may experience this a few times. This period of calm, like the eye in a hurricane, will allow us to check the portfolios for damage and see what, if any, changes or tweaks need to be made to be ready for the next wave. The patience required to wait out a big storm is often the same patience required to wait out a market correction. The calm people have during storms is a function of how well they have prepared. The more prepared, the calmer and more patient they can be. Rest assured, we are prepared for a downturn such as this and we, and you, can afford to be patient while this rolls through.
Changing gears, we saw an enormous stimulus bill passed in the last week and the immediate question is…
What’s inside the $2 trillion CARES Act? What’s in it for me? How does it affect me?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is designed to provide relief for individuals and businesses who have been hurt by the outbreak. I won’t try to include all 800+ pages in this email, but here are a few key provisions that you should know about:
One-time cash payment. Taxpayers are eligible for a one-time direct deposit of up to $1,200 per adult ($2,400 per couple) plus $500 per child under age 16. Amounts are reduced for those who make more than $75,000 ($150,000 if married). If you have filed your 2019 taxes already, the IRS will use that income to calculate your payment; if not, they’ll use your 2018 tax filing.
Better unemployment benefits. The Act will extend and expand unemployment insurance through Dec. 31. Eligible workers (now including self-employed, independent contractors, and gig economy workers) will receive an extra $600/week for four months, on top of what they receive from state unemployment benefits.
Early withdrawal penalty waiver. The Act waives the standard 10% early withdrawal penalty for eligible coronavirus-related distributions from retirement accounts (retroactive to Jan. 1). You’ll still pay income taxes on withdrawals, but you can spread them over a three-year period or use that time to roll the distribution back over.
2020 RMDs suspended. You won’t have to take a Required Minimum Distribution from your IRA or 401(k) this year, leaving you in control of how much you withdraw. If you already took your RMD for 2020, you have several choices: keep it and pay taxes on it, return it to your IRA as an indirect rollover, or convert the amount into a Roth IRA (Roth conversions are permanent).
“Client” means someone who is under our protection, and that extends to your friends and loved ones.
Financial advice is a public service in these times, and we’re here to help. Please forward this email to any friends and loved ones who have been affected by the coronavirus and who might need some help. We are hearing from many people who are not receiving any guidance or reassurance during these difficult and confusing times.
As always, we appreciate the trust and confidence you show in our firm. It is our pleasure to serve you and hope for continued health for you and your loved ones. Please be safe.
Please feel to reach out to us for anything you may need.