Weekly Market Commentary 3/29/2021

Weekly Market Commentary 3/29/2021

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Weekly Financial Market Commentary

March 29, 2021

Our Mission Is To Create And Preserve Client Wealth

Last week, unemployment claims were looking good and consumers were feeling good.

The number of Americans applying for first-time unemployment benefits declined. Just 684,000 people filed claims during the week of March 20, down 97,000 from the week before, according to last week’s report from the Labor Department.

Granted, that’s a large number – higher than the highest number of first-time claims during the Great Recession – but it’s the smallest we’ve seen since the pandemic began, according to Christopher Rugaber of the AP. He wrote:

“Economists are growing more optimistic that the pace of layoffs, which has been chronically high for a full year, is finally easing…Still, a total of 18.9 million people are continuing to collect jobless benefits…Roughly one-third of those recipients are in extended federal aid programs, which means they’ve been unemployed for at least six months.”

Consumer sentiment also improved, according to data released last week. The University of Michigan’s Index of Consumer Sentiment was up 10.5 percent month-to-month, although it remained down year-over-year. Perceptions of current economic conditions improved, too. Surveys of Consumers chief economist Richard Curtin reported:

“Consumer sentiment continued to rise in late March, reaching its highest level in a year due to the third disbursement of relief checks and better than anticipated vaccination progress…The majority of consumers reported hearing of recent gains in the national economy, mainly net job gains. The data clearly point toward robust increases in consumer spending. The ultimate strength and duration of the spending surge will depend on the rate of draw-downs in savings since consumers anticipate a slower pace of income growth.”

Performance of major U.S. stock indices was mixed last week. The Dow Jones Industrial Average and Standard & Poor’s 500 Index both finished higher for the week, while the Nasdaq Composite lost ground.

A fly…err, ship…in the ointment. Until last week, about 50 vessels, transporting approximately 10 percent of global trade, sailed through the Suez Canal every day, reported Scott Neuman and Jackie Northam of NPR.

The canal is a shortcut that makes it possible for ships to travel from Asia and the Middle East to Europe without sailing all the way around Africa’s Cape of Good Hope, a route that’s both less secure (pirates) and more expensive (time, insurance, and fuel), according to David Sheppard, Harry Dempsey, Leo Lewis, and Kana Inagaki of Financial Times.

That changed on Tuesday when one of the largest container ships in the world became wedged in the canal, blocking traffic in both directions, reported Sudarsan Raghavan and Antonia Noori Farzan of The Washington Post.

The effect on global trade, supply chains, and consumers has yet to be determined. “Like much else about the situation, it depends on how long it goes on. A weeklong delay for a few hundred ships at the Suez might have only a negligible impact for consumers, but a prolonged delay could increase the cost of shipping, complicate manufacturing, and ultimately drive up prices,” reported NPR.

Prior to the shutdown at the Suez Canal, container shipping costs were already rising. The increase was due, in part, to a shortage of shipping containers. In early February, The Economist reported, “Surging demand for goods and a shortage of empty containers at Asian ports have sent container-shipping costs rocketing…The Freightos Baltic Index, a measure of container-freight rates in 12 important maritime lanes, has increased from $2,200 to $4,000 per container…”

On Sunday, preparations were being made to unload some of the 18,000 containers the wedged ship carries to facilitate refloating, reported Yuliya Talmazan of NBC News.

Weekly Focus – Think About It

“Everything in a modern container port is enormous, overwhelming, crushing. Kendal, of course, but also the thundering trucks, the giant boxes in many colors, the massive gantry cranes that straddle the quay, reaching up ten stories and over to ships that stretch three football pitches in length. There are hardly any humans to be seen.”
–Rose George, British journalist and author

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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://www.dol.gov/ui/data.pdf
https://fred.stlouisfed.org/series/ICSA
https://apnews.com/article/pandemics-jobless-claims-unemployment-coronavirus-pandemic-economy-75c27fd877d7a07ba2be1bba59cd82ca
http://www.sca.isr.umich.edu
https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-29-21_Barrons-Market_Data-Footnote_5.pdf)
https://www.npr.org/2021/03/26/981600153/heres-how-a-long-shutdown-of-the-suez-canal-might-roil-the-global-economy
https://www.ft.com/content/3cbfa2dc-791b-47fa-a5f8-31d1b9a1757d (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-29-21_FinancialTimes-US_Offers_to_Help_Egypt_Unblock_Suez_Canal-Footnote_7.pdf)
https://www.washingtonpost.com/world/suez-canal-ship-blockage-ever-given/2021/03/26/357f8ae8-8da8-11eb-a33e-da28941cb9ac_story.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-29-21_TheWashingtonPost-Piracy_Fears_Mount_as_Ships_Take_Long_Way_Around_Africa_to_Avoid_Blocked_Suez_Canal-Footnote_8.pdf)
https://www.economist.com/graphic-detail/2021/02/11/container-shipping-costs-have-surged-in-recent-months (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-29-21_TheEconomist-Container-Shipping_Costs_have_Surged_in_Recent_Months-Footnote_9.pdf)
https://www.nbcnews.com/news/world/suez-canal-containers-could-be-taken-ever-given-officials-say-n1262271
https://books.google.com/books?id=ua0a4xIdJvUC&printsec=frontcover#v=onepage&q&f=false (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-29-21_Book_Excerpt-Ninety_Percent_of_Everything-Footnote_11.pdf)

End Of Week Market Update

End Of Week Market Update

End Of Week Market Update

One year.  It seems incredible, but it’s been one year since COVID-19 struck our shores.  One year since the World Health Organization declared a pandemic.  One year since the markets crashed and the schools closed and we realized just how much we take toilet paper for granted. 

Since then, the markets have recovered and risen to new heights.  The economy, meanwhile, has recovered more slowly.  Now, a quarter of the way through 2021, we have a new president, several new vaccines, and a completely different world than the one we knew before all this started.  We’ve also seen some renewed volatility in recent weeks.  This has many of my clients asking, “Where are the markets going next?  What should we expect for the rest of 2021?” 

I’ll address those questions in this letter.

As you know, there are two types of long-term market situations: Bull markets and bear markets.  But the whole “bull vs bear” concept can also be used to describe two types of investor sentiment.  Bulls are investors who have a positive, or “bullish”, view of where the markets are headed.  Bears, meanwhile, generally have negative, or “bearish” expectations.  So, in this letter, I’m going to let both animals debate each other, each presenting their case for why the markets will have a positive year or a negative one.  We’ll start with the Bull, move onto the Bear, and then give the Bull a chance for a short rebuttal.  Finally, as your financial advisor, I’ll give you my view. 

The Bullish View

Last year’s market crash was sudden, swift, and deep.  But in the grand scheme of things, it didn’t last very long.  In fact, it took only six months for the markets to recover.  (By contrast, it took the markets almost six years to recover after the Great Recession.)  Since then, the markets have risen to new highs. 

Three things propelled the markets to this remarkable turnaround: Low interest rates, federal stimulus, and the expectation of a major economic recovery.  Let’s start with the first one.  To help juice up the economy, the Federal Reserve lowered interest rates to a historic degree.  Low interest rates promote more borrowing and spending, two pillars our economy is based on.  They also help people buy homes and encourage businesses to invest more in themselves.  (Including hiring more workers.) 

Congress, meanwhile, has passed three major stimulus packages in the last year.  The most recent bill was signed by President Biden on March 11.  The America Rescue Plan Act of 2021, as it’s called, provides $1.9 trillion in aid for both businesses and consumers.1  Among other things, the Act extends COVID unemployment benefits through Labor Day, provides $1,400 direct payments to individuals, expands certain tax credits, and grants billions to small businesses to help meet payroll and retain workers.1  The first two stimulus packages had a positive impact on things like retail sales and consumer spending, and it’s widely expected that this one will, too. 

This combination of low interest rates and government stimulus have helped the economy tread water while we deal with the virus.  But much of the market’s rise is due to something else: Expectation.  Specifically, expectation that the pandemic will end, and the economy will hit the accelerator. As more people are vaccinated and case numbers fall, the thinking goes, more and more of society will re-open, releasing a flood of pent-up demand.  Demand to travel, to eat out, to catch a movie in theaters, you name it.  Add the latest round of stimulus to the mix, and suddenly Americans have both extra money in their pocket and the means to spend it.  In other words, all the ingredients are there for a major economic comeback, the likes of which we haven’t seen in decades. 

Now, we seem closer than ever to that expectation becoming reality.  As of this writing, there are three approved vaccines in the U.S., with more than 115 million doses administered.2  (40 million people are currently considered fully vaccinated, approximately 12.3% of the total population. 2)  Currently, our nation is averaging over 2 million shots each day.2  It’s no surprise, then, that cases in the U.S. have been falling for weeks.  In fact, as of March 19, cases are down over 14% over the last two weeks.3 

We’re not out of the woods yet, not by a long shot.  Masks and social distancing will continue to be a part of our lives for some time yet, and of course there are relatively new variants of the coronavirus to deal with.  But if we can maintain this trajectory, increasing the number of people vaccinated and reducing the number of people sick, that could do wonders for our economy.  It could lead to more of society re-opening, leading in turn to more jobs, more consumer spending, and greater company earnings.  Greater earnings, of course, usually lead to higher stock prices. 

The Bearish View

So, in light of all this, how can anyone have a negative view of where the markets are headed?  It all comes down to a single word:  Inflation.

Inflation.  It’s a scary-sounding word that conjures up images of German children stacking useless money in the 1920s, or gas rationing in the 1970s.  For decades, economists have monitored it relentlessly.  The Federal Reserve considers managing inflation to be a core aspect of its mission.  That’s partly why our nation’s inflation rate has been relatively stable over the last twenty years. 

But recently, some analysts and investors have begun stressing over inflation again.  They don’t deny that the economy is poised to grow.  They just worry that it will grow too much, too fast.  There’s a word for this, too.  Economists call it overheating.

When an economy overheats, it essentially no longer has the capacity to meet all the demand it faces from consumers.  Some producers will simply not be able to supply all the goods their customers want.  Other producers, to keep up with that demand, will be forced to raise prices.  It’s a classic example of the Law of Supply and Demand.  (When the demand for something outpaces its supply, the price goes up.)  For example, if everyone suddenly decides to fly to that vacation spot they’ve been putting off for a year, the cost of air travel would skyrocket.

If the economy were to grow too quickly, prices would rise across the board – and the value of our currency would drop.  This, essentially, is inflation: When the general price level rises, a dollar simply pays for less than it used to.  That makes it much harder for people to buy the goods and services they need.  Or to pay off their debts.  It makes it harder for businesses to hire new workers or pay the workers they already have.  The upshot?  When inflation gets too high, consumer spending plummets, unemployment jumps, and economic booms turn into economic busts. 

Some experts worry this is what’s in store in 2021.  They see the economy as a garden hose that’s been tied up into a knot.  Untie the knot – or re-open the economy too quickly – and the water will burst out with sudden, savage force. 

So, here’s what this has to do with the stock market.  Normally, the Federal Reserve combats inflation by raising interest rates.  Higher interest rates tend to cool off the economy, because they prompt people to save their money instead of spending or borrowing it.  A cooler economy decreases inflation, and gradually things go back to normal.  The problem is the stock market has become accustomed to the Fed’s low interest, “easy money” policies.  Low interest rates mean that many types of investments, most notably bonds, simply don’t provide the same return on investment as they would in a high-interest rate environment.  That drives more and more investors into the stock market to get the returns they need.  But what happens when interest rates go up?  Consumers and businesses could cut back on spending, which in turn could cause earnings to fall and stock prices to drop. 

Fear of inflation, and fear of higher interest rates.  That’s the bearish view in a nutshell. 

Rebuttal

I promised the Bull would have the opportunity for a short rebuttal, so here it is.  There are two main reasons for thinking this fear of high interest rates are overblown.  The first is that, even if inflation does go up – which it likely will – we have a lot of room to work with before it becomes a problem.  In 2020, the inflation rate was only 1.2%.4  That’s well below the 2% mark the Fed generally aims for, and nowhere close to the mindboggling numbers we saw in the late 70s and early 80s.  (In 1979, for example, the inflation rate was 13.3%.4

The other reason is that there’s no reason to assume the Federal Reserve will automatically raise interest rates just because inflation goes up.  Why?  Because the Fed itself has said that it won’t!5  Currently, the Fed sees stimulating the economy and boosting employment to be far bigger priorities than tamping down on inflation, and recently, the Fed Chairman suggested interest rates would remain low at least until 2022. 

My View

I’ve told you what the Bulls and Bears think.  So, here’s what think. 

Here at Research Financial Strategies, we don’t focus on guessing what the Fed will do, or anyone else.  We don’t have a crystal ball.  No one does!  That is why we base our strategy on technical analysis instead of macroeconomics.  We analyze – and take advantage – of market trends, relying on the Law of Supply and Demand rather than fighting it. 

Historically, an improving economy leads to a stronger stock market.  If that happens in 2021, wonderful!  But if interest rate fears worsen and volatility goes up, we are ready to play defense and move to cash.  Remember, we don’t need to “buy and hold” even when there’s a Bear roaring in our face.  If there’s a general rise in prices and inflation skyrockets above what the Fed can handle, we don’t have to ride out another market crash like so many investors do.  We’ll obey the rules of our strategy and do what the trend dictates.  If our technical signals indicate major volatility on the horizon, we’ll be prepared. 

It’s been a year since the pandemic began.  A year since some of the worst market turmoil in a long time.  We got through that by being flexible, disciplined, and diligent, and we’ve been rewarded.  So, that’s what we’ll continue to do. 

If you have any questions or concerns about the market, please feel free to contact me.  In the meantime, enjoy the upcoming spring season!       

Sincerely,

Jack Reutemann, Jr. CLU, CFP®​
240-401-2355

SOURCES:
1 “The American Rescue Plan Act Greatly Expands Benefits through the Tax Code in 2021,” Tax Foundation, March 12, 2021.  https://taxfoundation.org/american-rescue-plan-covid-relief/
2 “How is the COVID-19 Vaccination Campaign Going In Your State?” NPR, March 19, 2021.  https://www.npr.org/sections/health-shots/2021/01/28/960901166/how-is-the-covid-19-vaccination-campaign-going-in-your-state
3 “How Severe is Your State’s Coronavirus Outbreak?” NPR, March 19, 2021.  https://www.npr.org/sections/health-shots/2020/09/01/816707182/map-tracking-the-spread-of-the-coronavirus-in-the-u-s
4 “US Inflation Rate by Year,” The Balance, March 1, 2021. https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093
5 “Powell Confirms Fed to Maintain Easy Money Policies, The Wall Street Journal, March 4, 2021.  https://www.wsj.com/articles/feds-powell-to-take-questions-on-job-market-interest-rates-bond-yields-11614872817

Weekly Market Commentary 3/29/2021

Weekly Market Commentary

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

Weekly Financial Market Commentary

March 22, 2021

Our Mission Is To Create And Preserve Client Wealth

What are professional asset managers thinking?

Bank of America recently published the results of its March global asset managers’ survey, which polls 220 professional investors responsible for about $630 billion in assets, reported Julia La Roche of Yahoo! Finance.

Many of those surveyed were optimistic about 2021. During the next 12 months:

  • 91 percent of those polled expect the economy to strengthen (that’s a record high)
  • 89 percent anticipate global profits will improve
  • 52 percent expect value stocks to outperform growth stocks

 

So, what were managers most worried about?

For the first time since April 2020, the COVID-19 pandemic was not the most pressing concern for professional money managers. That spot was filled by inflation. Ninety-three percent of those surveyed expect inflation to rise during the next 12 months, reported Nicholas Jasinski of Barron’s, and that could affect stock prices. Jasinski reported:

“…higher bond yields mean higher borrowing costs, which could hinder the recovery and weigh on corporate earnings. Plus, a higher discount rate produces a lower present value for assets like stocks. And, when Treasuries produce enough yield, there’s greater competition for stocks.”

The discount rate is the Fed’s rate for lending to other banks.

One place to look for signs of inflation is bond yields. Recently, yields on U.S. Treasury bonds have been moving higher despite efforts by the Federal Reserve to keep them down, reported Lisa Beilfuss of Barron’s. It’s possible the bond market is pushing yields up because bond investors see inflation ahead. The AP’s Stan Choe and Alex Veiga explained:

“Inflation means future payments from bonds won’t buy as much – because the price of a banana or a bouquet of flowers will be higher than it is today. So, when inflation expectations rise, bonds are less desirable, and their prices fall. That pushes up their yield.”

Major U.S. stock indices finished last week lower.

(The one-year numbers in the scorecard are noteworthy. They reflect the strong recovery of U.S. stocks from last year’s coronavirus downturn to the present day.)

The world happiness report is out – and it was surprising. COVID-19 has disrupted just about every aspect of people’s lives – work, home, family, friends, and health – in every country of the world. Knowing this, it seems logical people would be less happy in 2020 than they had been in previous years. However, the findings of The World Happiness Report tell a different and more complex story. The authors explained:

“Many strands of data have been pieced together to produce a picture of almost astonishing resilience…Although there were significant increases in average sadness and worry, we found that overall life evaluations, and happiness rankings, were surprising stable. The top countries before the pandemic remained the top countries in 2020, so there is little change in the overall rankings.”

For the world as a whole, it appears negative changes in some variables, such as emotions and unemployment, were offset by positive changes in other variables, such as trust and generosity.

The remarkable stability of happiness may also reflect the fact some of population groups are not normally included in surveys – people who are homeless, in nursing homes, hospitals, prisons, and refugee camps – were also some those hit hardest by the virus.

There was another notable aspect of the study. Young people were significantly less happy in 2020 than they have been in previous years. The Economist explained:

“[In Britain], and in other rich countries, the age profile of happiness before the pandemic struck was roughly U-shaped when plotted on a graph. People began their adult lives in a cheerful state. They became glummer in middle age. Then, after about the age of 50, they started to become happier again…Today the pattern is an upward slope. The young are less satisfied than the middle-aged, who are less satisfied than the old.”

So, which countries were happiest in 2020? The top 10 included:

  1. Finland
  2. Iceland
  3. Denmark
  4. Switzerland
  5. Netherlands
  6. Sweden
  7. Germany
  8. Norway
  9. New Zealand
  10. Austria


Weekly Focus – Think About It
“Let us be grateful to the people who make us happy; they are the charming gardeners who make our souls blossom.”
–Marcel Proust, French novelist

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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://finance.yahoo.com/news/bank-of-america-fund-manager-survey-for-march-2021-121053204.html
https://www.barrons.com/articles/investors-are-wary-of-covid-but-their-new-top-risk-is-inflation-51616197535?mod=hp_DAY_10 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-22-21_Barrons-Investors_are_Wary_of_COVID_But_Their_New_Top_Risk_is_Inflation-Footnote2.pdf)
https://www.federalreserve.gov/monetarypolicy/discountrate.htm
https://www.barrons.com/articles/the-bond-market-is-fighting-the-fed-and-yield-sensitive-assets-are-getting-hit-51616094084?mod=hp_DAY_Theme_1_1 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-22-21_Barrons-The_Bond_Market_is_Fighting_the_Fed_and_Yield-Sensitive_Assets_are_Getting_Hit-Footnote_4.pdf)
https://apnews.com/article/why-rising-rates-unsettling-wall-street-explained-4a672f914e9396a9e9bcda44eebf74d6
https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-22-21_Barrons-Market_Data-Footnote_6.pdf)
https://happiness-report.s3.amazonaws.com/2021/WHR+21.pdf (pages 18, 34-39, 50, 168)
https://www.economist.com/international/2021/03/20/the-pandemic-has-changed-the-shape-of-global-happiness (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-22-21_TheEconomist-The_Pandemic_has_Changed_the_Shape_of_Global_Happiness-Footnote_8.pdf)
https://www.goodreads.com/quotes/tag/happiness

 

End Of Week Market Update

Don’t forget about your 2020 IRA contributions!

There’s still time to contribute to your IRA!

If you haven’t already contributed to an IRA (Individual Retirement Account), there’s still time to do so. Many people don’t know that the 2020 contribution deadline is actually April 15, 2021.1  However, if you do decide to contribute, you must designate the year you are contributing for. (In this case, 2020.) Your tax preparer should be able to help you fill out the necessary forms, but please feel free to contact me if you have any questions or need help.

For 2020, the maximum amount you can contribute is $6,000, or $7,000 if you’re over the age of 50.2  This applies to both traditional and Roth IRAs. If you’re unsure whether to contribute, remember: 
· Contributions to traditional IRAs are often tax-deductible. And while distributions from IRAs are taxed as income, your tax-rate after retirement could possibly be lower than it is now, lessening the impact. 
· Contributions to a Roth IRA, on the other hand, are made with after-tax assets. However, the advantage of a Roth IRA is that withdrawals are usually tax-free. 
· Whichever type you use, IRAs provide a great, tax-advantaged way to save for retirement.

If you or your spouse is covered by an employer-sponsored retirement plan and your income exceeds certain levels, you may not be able to deduct your entire contribution.  You may qualify to contribute to an IRA for a spouse without taxable compensation. There are also income limitations to be able to make contributions to a Roth IRA.  The rules are tricky and there can be penalties for contributing to either a traditional IRA or Roth IRA when over income limits. Consult your tax advisor to be sure you are making the right contribution choices.

If you have yet to set up an IRA for 2020, you can still do that. The deadline to establish an IRA is also April 15th. In other words, if you want to take advantage of the benefits an IRA has to offer, there’s still time to do so, either by contributing to an existing account or by establishing a new one.

If you have any questions about IRAs – whether one is right for you, how it should be managed, or anything else – please give me a call at 240-401-2355.  I’d be happy to help you. 

Jack Reutemann
Research Financial Strategies

 

​1 “IRA Year-End Reminders,” IRS, https://www.irs.gov/retirement-plans/ira-year-end-reminders
2 “IRA Contribution Limits,” IRS, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

Weekly Market Commentary 3/29/2021

Weekly Market Commentary 3/15/2021

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

Weekly Financial Market Commentary

March 15, 2021

Our Mission Is To Create And Preserve Client Wealth

Investors had a lot to be enthusiastic about last week.

Major stock indices in the United States soared, finishing the week higher and setting new records along the way, reported Al Root of Barron’s. There was plenty of good news to fuel investor optimism:

·         The $1.9 trillion American Rescue Plan was signed into law. The plan provides $1,400 payments to most Americans. It also delivers child-tax credits, health-insurance subsidies, and extends unemployment benefits into September, reported NPR. Funds also were made available for schools, states, and vaccination efforts, as well as tax relief for people receiving unemployment benefits.

·         The spread of the coronavirus appears to be slowing. The 7-day average number of cases in the United States dropped 11.2 percent week-to-week, reported the Centers for Disease Control (CDC). More than 20 percent of Americans have received a first dose of a COVID-19 vaccine and more than 10 percent have been fully vaccinated. As circumstances have improved, a number of states have begun easing lockdown restrictions.

·         Inflation remained low in February. For the 12 months through February 2021, the Consumer Price Index rose 1.7 percent, reported the Bureau of Labor Statistics last week. That’s well below the Federal Reserve’s usual target of 2 percent. However, food and energy prices increased significantly more than the index average.

Despite last week’s positive news, Ben Levisohn of Barron’s cautioned:

“The combination of trillions of dollars of fiscal stimulus, ultralow interest rates, and a newfound sense of liberation means the U.S. economy in coming months will be unlike any the country has experienced in decades. Growth will be faster. Inflation will run hotter. The job market could bounce back more speedily than even the Fed expects. This environment won’t be easy for investors to navigate…For those who can pivot as the market shifts, however, multiple opportunities await.”

There is another concern, as well. COVID-19 continues to mutate, and it remains to be seen whether vaccines will prove effective against new strains.

The one-year numbers in the performance table below are noteworthy and reflect the strong recovery of U.S. stocks from last year’s coronavirus downturn to the present day.

Big plans for the moon. The Outer Space Treaty of 1967 set forth principles making space – including the moon and celestial bodies – the province of all mankind. It confirmed the exploration and use of outer space should benefit all people. Here are a few of the plans various nations have for the moon:

·         International Lunar Research Station. Last week, China and Russia signed a memorandum of understanding. The nations plan to build a base on the moon. “…the base will be self-sufficient enough to work without constant resupply from Earth. It will exist either on the lunar surface, in orbit, or both. And it will be a launching point for basic science, exploration, and “utilization” of the moon’s resources, as well as a proof-of-concept for the technologies required to sustain human life so far from Earth,” reported LiveScience.

·         Lunar fish farming. The European Space Agency has plans for a Moon Village where settlers may be able to “boldly farm fish where no one has farmed fish before,” reported Hakai Magazine. Researchers at the French Research Institute for Exploitation of the Sea have found that European sea bass and meagre (stone bass) are strong candidates because their eggs can withstand the brutal shaking that accompanies the launch of space vehicles.

 ·        Solar-powered Lunar Ark. The movie Titan A.E. may have inspired researchers at the University of Arizona. They’ve proposed building a modern-day ark to hold “cryogenically frozen reproductive cells from 6.7 million species on our planet.” Popular Mechanics asked, “…what’s the next best use for a nearby celestial body with a stable environment that only takes about four days to reach on a supply mission? Turn it into a storage locker of sorts for the most precious data on Earth: our own reproductive cells.”

The moon isn’t the only part of space nations on Earth plan to explore more fully. The United Arab Emirates put a scientific satellite into orbit around Mars in February, according to The Washington Post. The new space race is here.

Weekly Focus – Think About It
“I would like to die on Mars. Just not on impact.”
–Elon Musk, Entrepreneur and businessman

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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://www.barrons.com/articles/higher-rates-wont-kill-the-stock-market-what-to-do-now-51615599362?refsec=the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-15-21_Barrons-Higher_Rates_Wont_Kill_the_Stock_Market-What_to_do_Now-Footnote_1.pdf)
https://www.npr.org/sections/coronavirus-live-updates/2021/03/09/974841565/heres-whats-in-the-american-rescue-plan-as-it-heads-toward-final-passage
https://www.cdc.gov/coronavirus/2019-ncov/covid-data/covidview/index.html
https://covid.cdc.gov/covid-data-tracker/#vaccinations
https://www.cbsnews.com/video/more-states-ease-coronavirus-restrictions-despite-warnings-from-health-officials/
https://www.bls.gov/news.release/cpi.nr0.htm
https://www.barrons.com/articles/as-the-covid-19-pandemic-fades-the-u-s-economy-could-soar-51615592979 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-15-21_Barrons-As_COVID_Wanes_the_US_Economy_could_Soar-What_that_Means_for_Investors-Footnote_7.pdf)
https://health.clevelandclinic.org/what-does-it-mean-that-the-coronavirus-is-mutating/
https://history.nasa.gov/1967treaty.html
https://www.livescience.com/china-russia-moon-mission.html
https://www.hakaimagazine.com/news/the-plan-to-rear-fish-on-the-moon/
https://en.wikipedia.org/wiki/Titan_A.E.
https://www.popularmechanics.com/space/moon-mars/a35796298/scientists-want-to-build-lunar-ark-to-preserve-mankind/
https://www.washingtonpost.com/business/new-space-race-shoots-for-moon-and-mars-on-a-budget-quicktake/2021/02/18/661c1c0a-7243-11eb-8651-6d3091eac63f_story.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/03-15-21_TheWashingtonPost-New_Space_Race_Shoots_for_Moon_and_Mars_on_a_Budget-QuickTake-Footnote_14.pdf)
https://www.brainyquote.com/quotes/elon_musk_567227

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