Happy Monday August 17th to everyone.

I will get the occasional question when doing reviews, how we choose the certain pieces for the “Highlights form Analysts and Economists” section. At Affinity, we gets lots of data every day in various forms. We get our data from podcasts, emails, blogs, webinars, and calls we make into those companies. We have access to hundreds of these pieces of information. The team behind me researches this data and gets me what they feel is best for me to look at a second time. Then as I go through everything, I look for the common comments and opinions that are shared by most. Then lastly, I am looking for who can share their views in the easiest form to read so I can copy and paste that to all our clients. Many of these analysts and economists speak very techy and their audience is the financial professionals out there, not the average investor. We find that JP Morgan probably speaks the most layman’s terms, as well as they are also one of the most consistent out there to provide that data. (Having said that, today’s section from JPM, was a bit wordy.) We don’t always agree with what they say, but as professionals we appreciate how they put their information out there for us to use, and for us to share with you. Then we have our emails read and approved by compliance before we mass email them out on Monday. Kellie Banta, our Vice President, takes on that challenge to email every Monday.

Performance DJIA:

Mon 8/10 +1.30%
Tues 8/11 -0.38%
Wed 8/12 +1.05%
Thurs 8/13 -0.29%
Fri 8/14 +0.12%

Last week +1.81%
Since 2/19 market high -4.83%

Bond model you are in:
Last week -0.27%
Bond model last 30 days +0.91%

Tid Bits:

1. Pandemic has companies dropping earnings guidance, and some say it should be nixed altogether (CNBC–Bob Pisani@BOBPISANI)
a. A growing number of companies has nixed earnings guidance amid the coronavirus pandemic.
b. JPMorgan’s Jamie Dimon as well as renowned investor Warren Buffett have previously called for companies to stop providing quarterly earnings guidance, arguing that it promoted short-term thinking.
c. Only about 1 in 5 companies in the S&P 500 still provide quarterly guidance.

2. Earnings are back, but Wall Street’s guidance game? Maybe it’s gone for good (CNBC–Eric Rosenbaum@ERPROSE)
a. Nearly half of the S&P 500 companies have declined to provide guidance with second-quarter earnings reports.
b. IBM said on Monday it does not know when guidance will return, and Barry Diller recently told CNBC that his company IAC may never issue financial guidance again.
c. Critics, including some big pension funds, say this crisis is another chance to get rid of the short-term guidance game, and past crises did result in a decline in companies issuing guidance.

3. Here’s what Trump’s payroll-tax deferral could mean for your paycheck
a. The president’s executive order deferred, but didn’t forgive, an employee’s Social Security tax liabilities
b. Workers shouldn’t be waiting for a windfall in their upcoming paychecks, tax-policy experts said Monday as they digested news of President Donald Trump’s executive order deferring payroll taxes.
c. The order might not bump up take-home money all that much per paycheck — and that’s assuming employers even pause the tax withholding from Sept. 1 to the end of the year, as the order instructs.
d. When it came to payroll taxes, Trump’s order said this: “This modest, targeted action will put money directly in the pockets of American workers and generate additional incentives for work and employment, right when the money is needed most.”
e. The order defers the employee’s obligation to pay a 6.2% Social Security tax per paycheck. It applies to people who “generally” make less than $4,000 every two weeks, which works out to an annual salary of $104,000.
f. The order instructs the Treasury Department to look into how the government can forgive the deferred tax payment. For right now, at least, observers say the tax obligation isn’t being forgiven.
g. The new executive order puts workers’ 6.2% obligation on hold. But what does that mean in practical terms?: The median 2018 household income was $63,179, according to U.S. Census Bureau statistics. Suppose a hypothetical taxpayer made $64,000 before taxes. Slicing $64,000 into 26 paychecks paid on a biweekly basis comes out to roughly $2,461 per paycheck, pretax.
h. The 6.2% Social Security tax on that paycheck would be approximately $152. With two paychecks paid each month from September through the end of the year, that comes to a deferred amount of $1,220 — a hypothetical sum around the size of one stimulus check, albeit in smaller installments.
i. Businesses are still ultimately on the hook to pay the taxes:
j. Unless there’s a law changing the situation, the taxes are due at the beginning of next year, according to Mark Mazur, director of the left-leaning Urban-Brookings Tax Policy Center. “Employers will be reluctant to pass along the deferred taxes to their employees, because they may have to figure out how to recoup those funds when they make the deferral payment,” Mazur said. There could be additional tax headaches for workers who leave their jobs or businesses that close before the end of the year, he added. ‘It is highly questionable whether firms would actually pass the money along to their workers, because it is the businesses that are on the hook for the taxes.’— Stephen Stanley, Amherst Pierpont

4. (Headline USA) Speaker Nancy Pelosi said Sunday she is calling the House back into session over the crisis at the U.S. Postal Service. With heightened scrutiny of its operations, the Postal Service is now requesting a temporary pre-election rate increase, from mid-October through Christmas, although not for first-class letters. Trump said last week that he was blocking a $25 billion emergency injection sought by the Postal Service, as well as a Democratic proposal to provide $3.6 billion in additional election money to the states. The money for the post office is intended to help with processing an expected surge of mail-in ballots. Both funding requests have been tied up in congressional negotiations over a new coronavirus relief package.


a) Global 21,853,478 cases 773,588 deaths
b) US 5,567,765 cases 173,139 deaths (+4.54%, +7,520 increase from last week)
c) KS 34,290 cases 407 deaths
d) MO 68,458 cases 1,457deaths

Highlights from analysts and economics

1. From JP Morgan
a. The Investment Implications of the Coronavirus Debt Surge
i. Negotiations appeared to break down late last week and the President announced executive actions on some of the contentious issues. However, for all practical purposes, the President does not have the authority to cut taxes or increase spending without the consent of Congress and the stop gap measures announced last weekend will need to be replaced by a more comprehensive bill.
ii. We now expect deficits of roughly $3.5 trillion in fiscal 2020 and $3.0 trillion in fiscal 2021, bringing the debt to $23.3 trillion or 106.5% of GDP by September 30th, 2021, just below the 108.2% of GDP peak reached in 1946 as the U.S. government faced the colossal debt racked up in fighting World War II.
iii. Many worry that this level of debt will result in a fiscal crisis.
iv. For the Federal Government, it is imperative that, as the economy recovers from the pandemic, it has the discipline to reduce the federal deficit. This will require both reductions in the growth in spending and increases in taxes and will be necessary, not just to control the growth in debt, but also to make sure that the economy does not overheat as it once again approaches full employment. It will also be essential to adopt measures designed to increase the pace of long-term economic growth, including encouraging private investment and growth in the skilled labor force.
v. For the Federal Reserve, it will require a reassertion of independence. Jay Powell and his predecessors have normally, and correctly, eschewed providing advice on fiscal matters, leaving the details of taxation and spending to elected officials. However, it is important for the Fed not to be perennially seen as “the lender of first resort” to the Federal Government, a role which it has adopted in this pandemic recession. If politicians see it as so, then they will always assume that the consequences of reckless fiscal policies can be delayed until after the next election – which is a recipe for disaster. While the Fed does not need to push against unrestrained fiscal expansion, it does not need to enable it either.
vi. For investors, while it is nice to be positioned to take advantage of a best-case scenario and important to be protected against a worst-case scenario, it is crucial to see the most probable path with clarity. That probable path, in the aftermath of the pandemic, is one of somewhat higher inflation, somewhat tighter monetary policy and somewhat higher taxes. Moreover, these challenges may present themselves sequentially.
vii. Higher inflation could come first and, on its own, would tend to be a negative for cash and bonds, neutral for equities and positive for real assets.
viii. A tighter Fed, in response to higher inflation, should hurt the bond market more while the generally higher interest rate environment it would create should be most damaging to equities selling at high multiples of current earnings and thus with more of their value embedded in cash flows to be received far into the future.
ix. Higher interest rates would, of course, further undermine the federal finances and would likely lead to higher taxes. Given the current preferential treatment of stocks in the U.S. tax code, higher taxes could be most damaging to equity returns.
b. Weekly Market Recap
i. As has been the case in the U.S., 2Q earnings fell very sharply in international markets as COVID-19 induced shutdowns weighed heavily on corporate results. The regions with the biggest weighting in cyclical sectors have seen the biggest fall in earnings. Cyclical sectors account for only 35% of the S&P 500’s market capitalization, while representing 50% or more of international markets. So far, earnings in Europe and Japan are on track to fall by -31% and -26% y/y, respectively, in 2Q. In addition, cyclical regions of emerging markets are expected see much deeper contractions at -56% for EMEA and -72% for Latin America. On the other hand, earnings in EM Asia are tracking positive growth of 7%, reflecting its more moderate weighting toward cyclicals and its advanced recovery relative to the rest of the world. Overall, while cyclicality has led to a larger drop in international earnings in 2020, it should also drive a stronger bounce back in 2021. In addition to a stronger cyclical bias, some foreign countries have achieved better control over the virus than the U.S. and, like the U.S., have provided broad fiscal support to their economies. Combined with the potential for further U.S. dollar weakness, international markets might finally be at a better starting position as we enter a new cycle. Consequently, this may be a good moment for investors to consider some international diversification by increasing their exposure to regions that can benefit from a potentially stronger economic revival, especially Europe and EM Asia.
c. Multi-Asset Solutions Weekly Strategy Report
i. Investors gave a cautious welcome to the European Next Generation Fund, as demonstrated by the rally in the euro, signaling that the euro breakup risk premium is already being priced out. We believe the initiative is a game changer, paving the way toward fiscal convergence and capital market integration.
ii. Pro-cyclical spending should persist in Europe well after the coronavirus pandemic has passed. We could see an explicit fiscal transfer from northern Europe to the south and east, a notion unthinkable just months ago.
iii. We think the move in the euro is the beginning of what will be a sequential improvement in the outlook for European assets. Periphery government bond spreads could experience an early tailwind. But across asset classes, global investors will want more reassurance that Europe has turned a corner before committing to a major reallocation.


Community Café is Wednesday, August 19th at 8:00am for 30 minutes. Topic will be on: “How to Use Estate & Tax Planning to your Benefit”

  • Will live stream on Facebook Live anyone who is friends with me on Facebook or Click Here to
  • Follow The Community Café Facebook Page
  • Email invitations were sent to join on the Zoom.us platform
  • Speakers, Christian Toman of Frist Option Bank & Glenn Stockton of Stockton & Stern Law
  • Invitations will go out via email with a link to join on zoom.com, plus those who are friends with me on Facebook

Estate Planning webinar on Tuesday, August 18th at 6:00pm or August 19th at 12:00pm noon

Social Security and Tax Strategy Webinar on Tuesday August 25th at 6:00pm and Wednesday August 26th at 12:00pm noon

Click here for August 25th 6:00pm or for August 26th at 12:00pm noon. Or email Stacy at [email protected]

If you would like a copy of my 30 minute recording of Community Café on the topic of “Tax saving Strategies”, please contact Stacy and we can email it to you.

Are you over age 72? RMDs, can be re-invested back into your IRAs.

If you previously took your annual RMD, and with the stimulus package CARES allowing RMDs in 2020 only to be skipped, you can put that money back into your IRA. Call us for more details.

Referral rewards program:














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Stay safe and stay healthy,
Mark Roberts