Market Commentary – April 27, 2020

Market Commentary – April 27, 2020

Weekly Financial Market Commentary

April 27, 2020

Our Mission Is To Create And Preserve Client Wealth

We live in interesting times.

There is discussion about whether the saying, “May you live in interesting times,” is a blessing or a curse. At this point in 2020, we all understand why.

Last week, the world watched in consternation as the price of oil, specifically West Texas Intermediate crude oil, dropped into negative territory. The price moved below zero because a purchase date coincided with a lack of storage space. As a result, the owners of the oil had to pay to have it taken off their hands, reported Ben Levisohn of Barron’s.

Oil prices recovered on Wednesday. Global oil producers have promised to reduce output, which would realign supply and demand, but it has yet to happen, reported Evie Liu of Barron’s. The delay may reflect a hope that coronavirus restrictions will ease, economies will begin to reopen, and demand for oil will increase.

Investors were understandably unsettled by oil prices, and U.S. stocks lost value early in the week. As oil stabilized, U.S. stocks pushed higher. The rebound in stocks stalled on news that trials for a potential COVID-19 treatment had produced disappointing results.

Thursday’s unemployment data showed 4.4 million people filed for unemployment benefits the previous week. That brought the number of unemployed Americans to more than 26 million, according to Jeffry Bartash of MarketWatch.

Earnings, which reflect companies’ profits, remained less than robust, as expected. “The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the first quarter is -15.8 percent…” reported John Butters of FactSet.

The energy sector finished the week in positive territory.

Stimulus checks are arriving
The Internal Revenue Service (IRS) has distributed $157.9 billion through 88 million stimulus payments, according to Andrew Keshner of MarketWatch.

If you have recently lost a job, or you’re having difficulty paying bills, your check may already be spent. However, if you’re still working, or remain financially comfortable, think carefully about how you want to spend your checks. The money could be used to improve your long-term financial outlook or provide support to people in need. For instance, you could:

  • Contribute to an emergency fund. It’s a sound idea to have savings equal to three to six months of expenses in a rainy-day fund in case something unexpected happens, such as a coronavirus quarantine.

 In 2019, the Board of Governors of the Federal Reserve reported just 61 percent of adults had enough savings set aside to cover a $400 unexpected expense. The report stated, “During 2018, one-fifth of adults had major, unexpected medical bills to pay, with the median expense between $1,000 and $4,999. Among those with medical expenses, 4 in 10 have unpaid debt from those bills.”

  • Pay off high-interest rate debt. If your income is secure, using your check to reduce high interest rate debt may be a good choice.

In early April, the average interest rate assessed on credit cards accounts with unpaid balances was 16.61 percent. Reducing your balance, could significantly reduce the amount of interest you pay. In addition, if something unexpected happens, having a higher level of available credit could be beneficial.

Donate the amount. If you are confident you will not need the money, consider making a donation. A donation can take many forms. You could help a loved one pay bills or provide support to a church or charity.

 “…many charities and nonprofits are still struggling. Donations to some churches have plummeted, and many charities have had to cancel crucial fundraising events such as galas, bike races, and walkathons,” reported the Associated Press.

What are you planning to do with your stimulus check?

Weekly Focus – Think About It

“Do you think you remember a movie in which a knight gallops toward a castle just as its drawbridge is going up, and his white horse jumps the moat in one glorious airborne leap?

…we’re that rider. Chasing us is the dreaded coronavirus. We’re in midair, hoping we make it to the other side, where life will have returned to what we think of as normal. So, what should we do while we’re up there, between now and then? Think of all the things you hope will still be there in that castle of the future when we get across. Then do what you can, now, to ensure the future existence of those things.”

-Margaret Atwood, Time Magazine, April 16, 2020

Best regards,

Jack Reutemann, Jr. CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.

Most Popular Financial Stories

Memorial Day

Memorial Day

In honor of Memorial Day, we’d like to tell you a story about a man named Ben Salomon.Ben Salomon was a dentist. He went to school, got his degree, and started...

read more
Special Market Update

Special Market Update

First, I want to thank everyone for all the calls and emails. We are all doing great, and I hope all of you are safe and healthy. At the same time, I am humbled...

read more
Breaking down the CARES Act

Breaking down the CARES Act

How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment Portfolio > Our Mission Is To Create And Preserve Client Wealth...

read more
Emergency Special Market Update

Emergency Special Market Update

December 9, 2020 Our Mission Is To Create And Preserve Client Wealth How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment...

read more

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

 

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://en.wikipedia.org/wiki/May_you_live_in_interesting_times
https://www.barrons.com/articles/in-a-stock-market-like-this-anything-could-cause-the-next-panic-heres-what-to-watch-51587776542?mod=hp_HERO (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/04-27-20_Barrons-In_a_Stock_Market_Like_This_Anything_Could_Cause_the_Next_Panic-Heres_What_to_Watch-Footnote_2.pdf)
https://www.barrons.com/articles/dow-jones-industrial-average-rose-as-oil-prices-came-back-51587591022?refsec=markets (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/04-27-20_Barrons-The_Dow_Rose_457_Points_Because_Oil_Prices_Came_Back-Footnote_3.pdf)
https://www.marketwatch.com/story/jobless-claims-jump-another-44-million-25-million-americans-have-lost-their-jobs-to-the-coronavirus-2020-04-23
https://www.investopedia.com/terms/e/earnings.asp
https://insight.factset.com/sp-500-earnings-season-update-april-24-2020
https://www.marketwatch.com/story/the-irs-has-already-paid-out-over-half-the-stimulus-check-money-heres-where-it-went-2020-04-24
https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-dealing-with-unexpected-expenses.htm
https://www.federalreserve.gov/releases/g19/current/default.htm
https://apnews.com/0cca8af954b111ef460d823f7cd81a49
https://time.com/collection/finding-hope-coronavirus-pandemic/5820595/margaret-atwood-coronavirus-uncertainty/

Special Market Update from Jack Reutemann, Jr.

Special Market Update from Jack Reutemann, Jr.

All,

We are still on a “technical buy” – meaning we are staying in the markets.  Please view the chart below.  Green is good, red is bad, and we have a 45 degree trend line in play.  Notice that today we have recovered the 50 day moving average, this is a good sign as it indicates a positive movement in the market. The farthest, right hand side green bar, crossing thru the thick Fuchsia line. Even though CV19 is still a major problem, and unemployment claims have gone up again this morning, many believe the worst may be behind us.  Everyone has an opinion.  Either way, the market is liking the prospects for a recovery, and partial state-by-state openings.  Also, unless the deal falls apart at the last minute, another $425 billion small business stimulus package should pass the House today, having already passed the Senate. 

I’m trying to not overload you with info, but just hit the high points.

As before, call me if you have any investment questions!!! ​

Jack 
240 401 2355

Most Popular Financial Stories

Memorial Day

Memorial Day

In honor of Memorial Day, we’d like to tell you a story about a man named Ben Salomon.Ben Salomon was a dentist. He went to school, got his degree, and started...

read more
Special Market Update

Special Market Update

First, I want to thank everyone for all the calls and emails. We are all doing great, and I hope all of you are safe and healthy. At the same time, I am humbled...

read more
Breaking down the CARES Act

Breaking down the CARES Act

How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment Portfolio > Our Mission Is To Create And Preserve Client Wealth...

read more
Emergency Special Market Update

Emergency Special Market Update

December 9, 2020 Our Mission Is To Create And Preserve Client Wealth How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment...

read more
Market Commentary – April 27, 2020

Market Commentary – April 13, 2020

Weekly Financial Market Commentary

April 13, 2020

Our Mission Is To Create And Preserve Client Wealth

Why is the stock market doing so well when the COVID-19 pandemic has yet to peak?

At the end of last week, the Centers for Disease Control and Prevention reported the United States remains in the acceleration phase of the coronavirus pandemic. This phase ends when new cases of COVID-19 level off. The next phase should be a period of deceleration, and the number of cases should decline.

There are several different models estimating when a peak may occur, and estimates vary from state to state, according to Sean McMinn of NPR. For instance, the model cited by the White House is from The Institute for Health Metrics and Evaluation at the University of Washington. It assumes social distancing measures will stay in place through the end of May. In this circumstance:

  • New York may have peaked April 9
  • California may peak April 15
  • Pennsylvania on April 17
  • Texas on April 28
  • North Dakota on April 30
  • Wyoming on May 2

All other states have peaked or are projected to peak on or before May 2, 2020.

Despite estimates suggesting the virus will continue to spread and businesses may not reopen fully until the end of May, U.S. stock markets moved significantly higher last week. Al Root of Barron’s reported:

“The S&P 500 index rose 12 percent…its best week since 1974 – and finished 25 percent off its March low. The corresponding gain for the Dow Jones Industrial Average was 13 percent, up 27.8 percent from its low. The Nasdaq Composite jumped 10.6 percent, raising it 23 percent off its low.”

Many factors affect U.S. stock market performance, including company fundamentals (how companies perform), investor sentiment (what investors think), consumer sentiment (what consumers think), monetary policy (what the Federal Reserve does), and fiscal policy (what the federal government does). The driver supporting stock market performance last week was Federal Reserve monetary policy. Axios explained:

“The Federal Reserve announced Thursday it will support the coronavirus-hit economy with up to $2.3 trillion in loans to businesses, state and city governments…The slew of new Fed programs comes as economic conditions deteriorate at an unprecedented pace…and another 6.6 million Americans filed for unemployment benefits this week.”

There continues to be uncertainty about how the U.S. economy will recover. As a result, we are likely to see markets remain volatile.

Boredom sparks creativity. Early last year, Time Magazine cited a study that found boredom may trigger creativity. Time explained, “In the study, people who had gone through a boredom inducing task – methodically sorting a bowl of beans by color, one by one – later performed better on an idea-generating task than peers who first created an interesting craft activity.”

Recent social media and news reports are providing anecdotal evidence that supports the idea. For example, people are:

  • Creating art galleries for pets. A couple of bored 30-year-olds built a mini art gallery for their pet gerbils while on quarantine. The Good News Network reported, “The tiny space was furnished with carefully curated rodent-themed takes on classic works of art – including the ‘Mousa Lisa.’”
  • Playing real-life versions of children’s games. In Wales, a nursing home has seniors practicing social distancing while playing a real-life version of Hungry, Hungry Hippos. “Instead of using hippo mouths to capture the plastic balls, however, the women brandished baskets on sticks…,” reported Good News Network.
  • Transforming their homes. One clever person transformed glass patio doors into stained glass using painters tape and washable markers, reported BoredPanda.
  • Cooking together. Quarantine cooking clubs are catching on. For instance, one club, “…assigns a new dish every weekend; a last meal of one of the celebrities who has been a guest on the James Beard Award nominated podcast, Your Last Meal,” reported the MyNorthwest

If you’re looking for something to do, the J. Paul Getty Museum (The Getty) in Los Angeles recently asked their followers to select a favorite work of art from their collection and re-create it using three everyday household items. The museum’s blog reported on the results so far:

“You’ve re-created Jeff Koons using a pile of socks, restaged Jacques-Louis David with a fleece blanket and duct tape, and MacGyvered costumes out of towels, pillows, scarves, shower caps, coffee filters, bubble wrap, and – of course – toilet paper and toilet [paper] rolls.”

Weekly Focus – Think About It
“I wanted a perfect ending. Now I’ve learned, the hard way, that some poems don’t rhyme, and some stories don’t have a clear beginning, middle, and end. Life is about not knowing, having to change, taking the moment and making the best of it, without knowing what’s going to happen next.”
–Gilda Radner, Comedian

Best regards,

Jack Reutemann, Jr. CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.

Most Popular Financial Stories

Memorial Day

Memorial Day

In honor of Memorial Day, we’d like to tell you a story about a man named Ben Salomon.Ben Salomon was a dentist. He went to school, got his degree, and started...

read more
Special Market Update

Special Market Update

First, I want to thank everyone for all the calls and emails. We are all doing great, and I hope all of you are safe and healthy. At the same time, I am humbled...

read more
Breaking down the CARES Act

Breaking down the CARES Act

How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment Portfolio > Our Mission Is To Create And Preserve Client Wealth...

read more
Emergency Special Market Update

Emergency Special Market Update

December 9, 2020 Our Mission Is To Create And Preserve Client Wealth How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment...

read more

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

 

Investment advice offered through Research Financial Strategies, a registered investment advisor.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:
https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/summary.html
https://www.npr.org/sections/health-shots/2020/04/07/825479416/new-yorks-coronavirus-deaths-may-level-off-soon-when-might-your-state-s-peak#allstates (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/04-13-20_NPR-Coronavirus_State-By-State_Peak_Projections-Footnote_2.pdf)
https://www.barrons.com/articles/the-s-p-500-had-its-best-week-since-1974-next-up-an-economic-coma-51586560230?mod=hp_HERO (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/04-13-20_Barrons-Stocks_Just_had_Their_Best_Week_in_Decades-Get_Ready_for_a_Drop-Footnote_3.pdf)
https://www.axios.com/the-fed-rescues-wall-street-but-main-street-is-another-story-7a946388-6f0a-4f31-97f6-2e28e249b01a.html
https://www.axios.com/federal-reserve-coronavirus-lending-3616d77e-e69d-42d7-95bf-6612407cc16a.html
https://www.axios.com/stock-market-volatility-coronavirus-recession-787550a9-ba22-42b6-9dc6-bfffa085ea23.html
https://time.com/5480002/benefits-of-boredom/
https://www.goodnewsnetwork.org/quarantined-couple-makes-art-gallery-for-gerbils/
https://www.goodnewsnetwork.org/watch-seniors-play-real-life-hungry-hungry-hippos/
https://www.boredpanda.com/creative-quarantine-handmade-things/?media_id=2146779&utm_source=google&utm_medium=organic&utm_campaign=organic
https://mynorthwest.com/category/podcast_results/?sid=1148&n=Your%20Last%20Meal%20with%20Rachel%20
https://blogs.getty.edu/iris/getty-artworks-recreated-with-household-items-by-creative-geniuses-the-world-over/
https://www.goodreads.com/quotes?page=13

Breaking down the CARES Act

Breaking down the CARES Act

How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment Portfolio >

Breaking down the CARES Act

Our Mission Is To Create And Preserve Client Wealth

Breaking down the CARES Act
As you know, the coronavirus pandemic has created both a health crisis and an economic crisis.  As of this writing, there are over 160,000 known cases.1 By the time you read this, there will certainly be more – and that number does not reflect those who have been infected but not tested.  The economic cost, meanwhile, has resulted in millions of Americans losing their jobs.  Some economists at the Federal Reserve estimate the unemployment rate could rise as high as 32%!2 To help address both crises, Congress recently passed the Coronavirus Aid,

Relief, and Economic Security (CARES) Act.  It’s a massive, $2 trillion stimulus package designed to help everything from hospitals, to individuals, to businesses large and small.  Time will tell if it will be enough to blunt the impact of this pandemic, but the fact Congress was able to pass something so significant, so quickly, is a rare feat worth celebrating. Charles Darwin once said, “It is the long history of humankind that those who learned to collaborate and improvise most effectively have prevailed.”  For many years now, that is not a quote you could usually apply to the United States Congress.  Political partisanship has meant that gridlock usually prevails over collaboration. 

Thankfully, both sides of the aisle recently proved the institution still works when people put aside their differences and work together for the common good. This is major legislation, with benefits for almost every American.  Some of the bill’s provisions are especially important for retirees.  So, to help you understand what the CARES Act does, and how it will impact you, we have prepared a special breakdown.  As we are sending this to all our clients, some information may apply to you, and some may not.  Please read it carefully, and then let us know if you have any questions. As always, we hope you and your family are staying healthy and safe.  Please let us know if there is anything we can do for you! Sincerely, Jack Jack Reutemann, Jr Research Financial Strategies      

Important Provisions of the CARES Act
The CARES Act is designed “to provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.”3  Think of it as a kind of massive care package.  Just as an actual care package is meant to get somebody through a tough time, that’s what the CARES Act is designed to do.  Because so many people have either lost their job, seen their hours cut back, or experienced drastic changes to their daily lives, many Americans must now contend with potential cashflow problems.  The CARES Act contains a number of provisions to help individuals and businesses handle those problems, at least for the short-term. What follows is a brief overview of the provisions that could affect you and your finances. 

Let’s start with:

DIRECT PAYMENTS4
What’s the quickest way to ensure people get the money they need?  Pay them directly.  Perhaps the most newsworthy aspect of this bill is that many taxpayers will receive a one-time direct payment to help them cover expenses. Here’s a breakdown of how it will work. Individuals who made up to $75,000 in 2019 will receive $1,200.
Heads of Household (single parents, for example) who made up to $112,500 in 2019 will receive $1,200.
Married couples filing a joint tax return who made up to $150,000 in 2019 will receive $2,400.
On top of this, each taxpayer will receive up to $500 for each child they have under the age of 17.  So, for example, a married couple with two children would receive $3,400. Note that payments decrease for individuals and married couples with income above their respective thresholds.  Specifically, payments shrink by $5 for every $100 earned above the $75,000/$150,000 limits.  The payments disappear entirely for individuals who made $99,000 or more, and for married couples who made $198,000 or more.

So, when will this money actually arrive?  It’s unclear.  The IRS could start issuing payments sometime in April or May, but an official schedule has not been released.  (The CARES Act itself only mandates that payments be made “as rapidly as possible.”4)  It’s likely that those who filed their 2019 tax returns with direct-deposit information will receive payments first. If you haven’t filed your tax return for 2019 yet, please let us know.  We would be happy to work with your tax preparer to expedite the process.

Speaking of tax filing…
NEW TAX DEADLINES 
This isn’t technically part of the CARES Act, but I’m going to cover it anyway because it’s important.  Due to the pandemic, IRS has extended this year’s tax-filing and payment deadlines.  Now, taxpayers have until July 15 – up from the standard April 15 – to file their 2019 tax returns.  The deadline to make IRA and Roth IRA contributions is now July 15 as well. Note that this new deadline applies to everyone, not just those who are sick, under quarantine, or materially affected by the coronavirus in some way.  And if you’ve already filed your return, you should still receive your refund around the same time you would during a typical tax season.

UNEMPLOYMENT4
Let’s get back to the CARES Act. It was said a moment ago that direct payments were the most newsworthy aspect of the bill.  But for the overall economy, the bill’s unemployment provisions are probably the most important.  Unemployment claims rose by 3.28 million between March 15-21.  That’s the highest weekly surge in history.  The previous record?  695,000.6 To help combat this, the CARES Act provides approximately $260 billion in unemployment assistance for those who lose their jobs.  This includes freelancers, independent contractors, and other self-employed workers.  That’s a major change, because under normal circumstances, they can’t apply for unemployment benefits.

Generally, workers who lose their jobs will receive $600 per week for four months, in addition to what their state unemployment program pays.  The CARES Act also adds an additional thirteen months of federal unemployment insurance on top of a person’s state benefits. If any family members lose their job, please let us know.  We would be happy to answer their questions or provide any assistance we can.

BUSINESS SUPPORT4
Even those who don’t lose their jobs will still want to keep a close eye on our nation’s unemployment rate.  More people out of work means less people spending money on the economy – which can have a profound influence on the markets.  That’s why one of the most critical things the government can do right now is help businesses avoid laying people off. Roughly $350 billion of the legislation’s price tag is geared towards just that.  Companies with up to 500 employees can receive loans of up to $10 million.  Any portion of the loan used to maintain payroll or retain workers – at least through the end of June – will be forgiven. 

In addition, businesses can apply for grants of up to $10,000 to cover their operating costs. For larger businesses, the CARES Act sets aside around $500 billion in loans and grants, especially for hard-hit industries like airlines.  And for companies that are forced to close or furlough workers, the legislation “covers to 50% of payroll on the first $10,000 of compensation, including health benefits, for each employee.”7 These are all necessary steps to keep our economy going.  Will they be enough?  That’s an open question.  The answer largely depends on how long the pandemic lasts – and how well Americans commit to social distancing to stop the virus’ spread.  Watch this space.

RETIREMENT FUNDS4
We said at the beginning of this message that some of the CARES Act’s provisions are especially important for retirees.  Let’s cover those now.   First up, Required Minimum Distributions, or RMDs.  In a normal year, anyone 72 years or older would need to withdraw a minimum amount from their IRA or 401(k).  Not this year. Under the CARES Act, all RMDs are suspended in 2020.  That means you can leave that money in your retirement account for the year if you don’t need it now.  Note that this applies both to retirement account owners and beneficiaries.

People who have already taken their distribution for 2020 can potentially return the money to their account if they want.  This could be a slightly complicated process, so we won’t cover it here.  However, if you want further information about it, let us know. The CARES Act also waives the 10% early withdrawal penalty for retirement accounts.  Withdrawals will still be taxed, but spread over a three-year period.  Under most circumstances, our advice is to leave your retirement savings where they are, but it’s nice to know that early withdrawals are an option if you need them. Finally, the CARES Act increases the 401(k) loan-limit from $50,000 to $100,000.  

If you have questions about any of these provisions, or how they apply to you, let’s chat!

COMBATTING THE CORONAVIRUS4
Finally, it should come as a great comfort to know that the brave doctors, nurses, and scientists on the front lines are getting assistance, too.  Specifically, the CARES Act provides $100 billion for hospitals, $1.32 billion for community health centers, $11 billion for coronavirus treatments and vaccines, $16 billion for additional medical supplies, like ventilators and masks, and $20 billion for veterans’ health care. 

You should know, too, that the Act includes a telehealth program so that if you can’t leave home, you can still have a virtual appointment with your doctor. Our hearts goes out to all those giving their time, talents – and sometimes, lives – to keep the rest of us safe.  They are true heroes, and we are so grateful for them.

Let’s all do our part to make their jobs just a little easier by maintaining our distance, keeping clean, and staying home as much as possible.

CONCLUSION
As you can see, the CARES Act is a loaded piece of legislation.  Time will tell whether more measures are needed, but this is definitely a good start. Of course, our team will continue poring over these changes. 

If there is anything else we feel you need to know, we’ll reach out to you. 

In the meantime, if you have any questions about:
• Getting a direct payment
• Filing your taxes
• Protecting your paycheck and/or income
• Your retirement accounts

Please don’t hesitate to let us know.  Whether we’re in the office or working from our own homes, our team is always here for you.

Stay healthy, and stay safe!  

Most Popular Financial Stories

Memorial Day

Memorial Day

In honor of Memorial Day, we’d like to tell you a story about a man named Ben Salomon.Ben Salomon was a dentist. He went to school, got his degree, and started...

read more
Special Market Update

Special Market Update

First, I want to thank everyone for all the calls and emails. We are all doing great, and I hope all of you are safe and healthy. At the same time, I am humbled...

read more
Breaking down the CARES Act

Breaking down the CARES Act

How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment Portfolio > Our Mission Is To Create And Preserve Client Wealth...

read more
Emergency Special Market Update

Emergency Special Market Update

December 9, 2020 Our Mission Is To Create And Preserve Client Wealth How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment...

read more

Sources

1 “Cases in U.S.”, Centers for Disease Control and Prevention, March 31, 2020.  https://www.cdc.gov/coronavirus/2019ncov/cases-updates/cases-in-us.html
2 “Coronavirus job losses could total 47 million, unemployment rate may hit 32%, Fed estimates,” CNBC, March 30, 2020.  https://www.cnbc.com/2020/03/30/coronavirus-job-losses-could-total-47-million-unemployment-rate-of-32percent-fed-says.html
3 “Text of S. 3548,” United States Senate, https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
4 “Text of the Coronavirus Aid, Relief, and Economic Security Act,” United States Congress.  https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
5 “New Details From the IRS on July 15 Tax Deadline, Audit Relief,” The Wall Street Journal, March 30, 2020.  https://www.wsj.com/articles/new-details-from-the-irs-on-july-15-tax-deadline-11585087948
6 “Unemployment claims soared to 3.3 million last week, most in history,” CNN Business, March 26, 2020.  https://www.cnn.com/2020/03/26/economy/unemployment-benefits-coronavirus/index.html
7 “What’s Inside the Senate’s $2 Trillion Coronavirus Aid Package,” NPR, March 26, 2020.  https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package    

LinkedIn
Share
RSS
6Lc_psgUAAAAAA9c7MediJBuq3wAxIyxDSt73c9j