Hello and happy Monday to everyone,
This is a really good email here today.
I was able to get out and vote last week in person. Lines were long but part of that was 6’ distance in line for social distancing. What I could see and count, there were over 200 people ahead of me, and it took about 50 minutes from getting in line, to leaving after voting. It moved quickly. The most important thing I want to share was how safe and clean I felt being there. I had my mask on and had disposable gloves. When I arrived, a lady handed me a pen that was individually wrapped up in its packaging. She held one end, while I pulled the pen out of the other end. Then I handed my drivers license to someone wearing a mask and gloves that officially checked me in. A lady took me to my voting station where she sanitized everything by spraying and wiping it clean. The pen they gave me has a rubber end that I used to vote and touch the screen with. I never actually touched the machine. When I was finished, it printed out my ballet, long skinny paper, which I took and deposited into a voting bin. So other than the pen I touched the corner of the ballet and placed it into a bin and I was finished. I was impressed.
My wife and son did their mail in ballots last week and in Kansas, it doesn’t need to be notarized. We encourage everyone to get out and vote.
Still no stimulus. Speaker of the House Nancy Pelosi, last weekend gave President Trump 48 hours to agree to what she is proposing for the stimulus and still no stimulus. The Presidential debate last week was much better to watch. Still a little nasty but more civil for sure.
Amy Coney Barrett did get through the Senate Judiciary Committee and they approved her. Next step is a Senate vote, which we believe is this week.
***Reminder, election is in 8 days. My guess is we won’t know officially the results for days later after all mail in ballots are calculated. ***This is your reminder on contacting us in the office, if you feel more comfortable to get more aggressive before the election, or more conservative before the election. If we don’t hear from you, we will continue on the path are now, looking for opportunities.
***One last note for this top section, Roth conversion dead line is December 15th for processing. We want to make sure we don’t miss the December 31st deadline with holiday schedules and processing is slower in that last 2 weeks of the year.
Mon 10/19 -1.44%
Tues 10/20 +0.40%
Wed 10/21 -0.35%
Thurs 10/22 +0.54%
Fri 10/23 -0.10%
Last week -0.14%
Since 2/19 market high -3.45%
3 reasons markets could be in for a bumpy week
Investors are trying to decide how to place their bets heading into the last two months of the year face a daunting task.
Between the imminent US election, an alarming rise in Covid-19 cases and a spate of quarterly results due this week from some of the world’s top companies, there’s no shortage of data to parse.
The election: We’re eight days out from Election Day in the United States. Investors have priced in a victory for Joe Biden, with prediction markets putting the odds of a win for the former vice president at 63%.
But some on Wall Street warn that markets aren’t perfect crystal balls. “It’s not over until it’s over,” cautioned Nicholas Colas, co-founder of DataTrek Research, in a recent note.
Investors are now counting on a new economic stimulus deal to be pushed through shortly after the election. But that will depend in large part on the outcome. If Trump enters a lame duck period, it could be hard to forge an agreement before a transition of power takes place next year.
Covid-19: Coronavirus cases are surging again in the United States and Europe. While investors continue to set their sights on a vaccine, fresh restrictions on movement and businesses have the potential to halt the nascent economic recovery, muddying the outlook.
The United States hit a record seven-day average of new Covid-19 cases last week, logging more than 83,000 new infections on both Friday and Saturday. Experts will know by early December whether a potential coronavirus vaccine is safe and effective, but there probably won’t be widespread availability until later next year, Dr. Anthony Fauci, the top US infectious disease expert, said Sunday.
Tech earnings: Both election jitters and the trajectory of the pandemic could send stocks lower this week. But the biggest US companies — including Microsoft (MSFT), Google parent Alphabet (GOOGL), Facebook (FB), Apple (AAPL) and Amazon (AMZN) — are also due to report earnings.
If they handily beat Wall Street’s expectations, as they have in the past, shares could rocket, supporting the broader market.
Morgan Stanley Says Buy Stocks If There’s An Election Plunge
October 21, 2020 • Ksenia Galouchko A plunge in U.S. stocks because of election fears would be the perfect buying opportunity, according to Morgan Stanley. Mike Wilson, the bank’s chief U.S. equity strategist, said there’s a good chance markets could drop before the election and investors have recently grown complacent about the risks of a drawn-out legal battle between President Donald Trump and Democratic hopeful Joe Biden. “If the S&P 500 were to go down to 3,100 index points and we didn’t know what was going on with the election yet, we’re going to be adding to risk at that point no matter what,” Wilson said in a phone interview. That’s because no matter who wins the election, it’s almost a certainty that they’ll unleash more economic stimulus, which would drive asset prices higher, said Wilson, who correctly foresaw the September market pullback. Morgan Stanley’s expectation is that the election will be decided by the Thanksgiving holiday on Nov. 26, which leaves room for three weeks of uncertainty to rattle markets. Fears over another spike in Covid-19 cases, the unknown timing of a vaccine and stalled stimulus talks are also weighing on investor confidence, Wilson said. “Markets might get more defensive,” before the election winner is declared, he said. “By the time the outcome is known, stock prices might already be lower.”
U.S. Budget Gap Tripled To Record $3.1 Trillion In Fiscal 2020. OCTOBER 16, 2020 • VINCE GOLLE
The world’s largest economy just posted its largest fiscal deficit on record. The U.S. budget shortfall more than tripled to $3.1 trillion in the government’s fiscal year ended in September, swelling the national debt to exceed the economy’s size, after lawmakers opened the spending spigots to soften the blow from the coronavirus pandemic, Treasury Department data showed Friday. The deficit as a share of the economy surged to 16%, the largest since 1945, based on second-quarter gross domestic product. At the end of the financial crisis in 2009, the ratio was close to 10% before slowly narrowing through 2015. Federal spending jumped 47.3% to $6.55 trillion in fiscal 2020, driven by increased outlays for unemployment compensation and small businesses after government-ordered shutdowns to mitigate spread of the coronavirus. Fed Chairman Jerome Powell last week warned of a tepid recovery without additional government aid and said providing too much stimulus wouldn’t be a problem. The worry-about-deficits-later sentiment has been made easier because it’s cheaper for the government to borrow. In fact, federal interest payments this year have declined due to falling yields. Still, debt-to-GDP is now above 100% and borrowing will likely continue climbing over the next three decades. Democrats and Republicans need to “come together and start planning how they will make the tough decisions needed to save Social Security and Medicare and stop our massive debt from spiraling out of control once the crisis is over and the economy has recovered,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement on Oct. 8. Powell and other Fed officials say now isn’t the time to worry about the deficit because unemployment remains high and the pandemic has crushed many businesses. But over the long term, it’s a potential concern because it could crowd out private investment and in extreme cases spark inflation that risks diminishing the value of the U.S. dollar, the world’s reserve currency. Spending on the national defense went from the second-largest outlay in fiscal 2019 to fifth in 2020 as pandemic-induced spending resulted in larger spending for income security, health and Medicare.
U.S. Workers Say Covid Has Taken Joy Out Of Retiring. OCTOBER 21, 2020 • KAREN DEMASTERS
The pandemic has taken the joy out of looking forward to retirement for many workers, according to a survey by Well Fargo released Wednesday. It has also made many question whether they will have enough money to retire. The study, conducted in August, included 4,590 people, including 2,660 employees who said they had not been impacted by Covid-19, 725 employees who said they had been impacted. The sample included 200 high-net-worth workers, and 1,005 retired individuals. “For workers whose employment has been negatively impacted by Covid-19, retirement has become an even more challenging goal over the last eight months, with many expressing pessimism about their life in retirement,” the study said. Fifty-eight percent of workers impacted by the pandemic said they now don’t know if they have enough saved to retire, compared to 37% of all workers. For the study, workers impacted by the pandemic were defined as individuals who had been laid off or furloughed from a job, were working a reduced or staggered schedule, or who had taken a pay cut. “With individuals now largely responsible for saving and funding their own retirement, disruptive events and economic downturns can have an outsized impact on their outlook,” said Nate Miles, head of retirement for Wells Fargo Asset Management. “Even for the most disciplined savers, working Americans are not saving enough for retirement.” Sixty-one percent of those surveyed who have been impacted by the pandemic said they are much more afraid of life in retirement now and that the pandemic has taken the joy out of looking forward to retirement. When all workers were considered, 79% said they are very or somewhat satisfied with their current life and are in control of their financial life. Seventy-three percent of retirees said they feel in control of their financial situations. The study found incredible optimism and resiliency among American workers and retirees, which is remarkable in the current environment,” said Kim Ta, head of client service and advice for Wells Fargo Advisors. Almost all workers and retirees said Social Security and Medicare play or will play a significant role in their retirement, although many workers said they fear the programs will not be available when they need them.
Goldman Warns Of More Job Losses With Jumbo Mergers On The Rise. OCTOBER 16, 2020 • SRIDHAR NATARAJAN
Wall Street’s top matchmaker for megadeals sees a wave of corporate takeovers coming with a worrying implication for the workforce: a jump in job losses “Politicians are going to be faced with the uncomfortable reality that you’re going to have more big business doing better and that there’s going to be more losses of jobs along the way,” Goldman Sachs Group Inc. President John Waldron said at a conference Friday. “You are going to see a fairly sizable amount of large-cap M&A coming with stronger, healthier companies being the acquirer and taking advantage of weaknesses in their industry or elsewhere.” The remarks from Goldman’s second-in-command come just weeks ahead of a U.S. presidential election that’s been reshaped by economic fallout of the coronavirus pandemic and now stalled stimulus talks that threaten to undermine job recovery. Waldron warned of “sticky unemployment,” with people already facing workforce automation watching more positions disappear once companies combine. Big companies outside the most hard-hit industries can tap financing at extraordinarily low rates adopted by central banks to prop up the economy during the pandemic. “And the market is giving them the license to do M&A, encouraging more consolidation,” Waldron said. Goldman Sachs has been one of the biggest beneficiaries of this year’s turmoil, with its core Wall Street trading and dealmaking operations facing a surge in demand from investors and corporations looking to reposition themselves or raise capital. At Goldman and its peers, divisions providing those services have seen revenue and profitability surge to the highest levels in years.
Global 43,447,461 cases 1,160,544 deaths
US 8,890,481 cases 224,732 deaths (+2.29%, +5,026 increase from last week)
KS 77,944 cases 975 deaths
MO 176,284 cases 2,909 deaths
Highlights from analysts and economics
From JP Morgan
Notes on the Week Ahead
It always requires discipline to look beyond the next few weeks and months and take a long-term view. In the short run, investors remain focused on election uncertainty and how the once-again worsening pandemic, combined with stalemate over further fiscal stimulus, threatens to dramatically slow the pace of economic recovery, following a strong third-quarter bounce.
But while the short-term outlook is grim, a medium-term view can be more optimistic. Over the next few months, political tensions should diminish and Washington will likely take significant further steps to aid workers, businesses and state and local governments until the pandemic is brought to an end. We can also hope that a safe and relatively effective vaccine will be found and that the public, chastened by the experience of this terrible year, will be more united in following the guidance of public health officials to allow us to get back to normal life.
In 2022 and beyond, births and deaths in the United States will likely resume their recent trends. However, we will not be able to recover most of the lost ground in terms of the natural growth rate of the population. This makes immigration an even more important issue in driving economic growth for the rest of the decade. Because of the aging of the baby-boom, the working age population, would, in the absence of net immigration, fall by roughly 0.2% per year through the end of this decade. Consequently, a restoration of immigration to the pace of a few years ago would seem like a prerequisite to achieving faster economic growth. Without it, the U.S. would likely face a worsening of its fiscal position leading to higher taxes and bigger spending cuts.
Investors should, consequently, keep a close eye on this issue both in thinking about U.S. fixed income investing and in allocating between the U.S. and overseas markets.
Weekly Market Recap
The third quarter earnings season is in full swing, and with ~20% of S&P 500 companies having reported, current estimates point to a 15.8% y/y decline in S&P 500 operating earnings per share (EPS), after a 33% decline in 2Q and a 49% decline in 1Q. Thus far, earnings have generally surprised to the upside, with more than 83% of companies beating expectations and 76% beating on revenues. Pandemic trends like stay-at-home arrangements and business closures continue to be reflected in results: Healthcare and Technology earnings are beating expectations due to robust activity in biotech/pharmaceuticals and software investment, while the banks are taking smaller loan loss provisions and seeing significant growth in trading and capital markets revenue. In contrast, energy companies continue to struggle with the collapse in oil demand, and consumer discretionary earnings remain under pressure as service businesses struggle to remain open. All things considered, the risk to 2020 earnings appears to be to the upside, as the combination of a manufacturing rebound, weaker U.S. dollar and low interest rates suggest profits should continue to recover. However, consensus estimates for 2021 operating EPS of $164, or +44% y/y feel too optimistic. Altogether, investors looking at equity markets today should strike a balance between secular growth and cyclicality, which will allow for participation if markets rally, but also protect on the downside if virus conditions worsen.
From American Century
Given the binary nature of the U.S. presidential election, the election’s outcome will likely favor certain industries while adversely affecting others. Markets don’t like that kind of uncertainty. Now nine months into the COVID-19 pandemic, investors are cautious, and markets are already anxious.
The State of the (Economic) Union
So far, massive fiscal stimulus enacted after the virus outbreak have been unable to bring the general U.S. economy in line with the U.S. stock markets. The likelihood of more monetary and fiscal stimulus is helping to keep interest rates historically low. Additionally, the Federal Reserve has said it has no intentions of increasing interest rates for fear of further diluting the recovery. This may help stocks in the “reopening trade,” that is, those exposed to economic recovery.
But questions about what kind of policies to expect after the election are adding to market uncertainty. That’s because the outcome of the contest between incumbent President Donald Trump and former Vice President Joe Biden has the potential to significantly affect public policy and how industries and companies do business. Here’s how we think policy and industry could be affected in each scenario.
A Victory for Former Vice President Joe Biden
A Biden victory could likely mean higher taxes and increased regulation of certain industries. It may also include increased federal spending on infrastructure and clean energy, and criminal justice reform.
Biden has promised to restore and augment the Affordable Care Act (ACA). He also promised to increase capital gains tax rates and create programs to make participation in the U.S. economy more diverse and inclusive. A Biden White House benefits hospitals and health care providers, and pressures drug companies and financial services companies that could be subject to more stringent regulation.
On the other hand, we have had almost four years to observe what a Trump presidency looks like. A second term for President Donald Trump could deliver more changes to immigration policies and a possible U.S. exit from NATO. The President is also likely to continue weakening the ACA, if not fully repeal it. He may also try to overhaul entitlement programs like Medicare, Medicaid and Social Security.
President Trump’s policies could benefit the financials sector by supporting a low-regulation environment. Defense-related companies could also see support through increased federal spending. While his changes to the corporate tax code have generally benefited businesses, the possibility of continued trade disputes and more isolationist policies could hamper free trade. This prospect continues to worry some investors.
Don’t Overlook the Importance of Congressional Race Outcomes
The expectation that Biden would reverse some of the Trump administration’s pro-business policies may pressure corporate earnings, which are already uncertain because of the pandemic.
Research indicates, however, that stock performance has less to do with who wins presidential elections and more to do with the overall makeup of the U.S. government. Therefore, the outcomes of the congressional races are arguably more important to the markets.
A Democratic Majority
A “blue wave” sweep of a Democratic White House and both houses of Congress would make it easier to enact swift policy changes that could pressure stocks. A Biden victory coupled with a split Congress, however, would make it much more difficult for the new president to enact his policy proposals.
A Republican Majority
The tense U.S./China relationship continues to trouble global markets, and the Trump administration’s confrontational approach to China is well documented. If trade conflicts, retaliatory regulations, or supply chain disruptions increase, they would weigh on an already weakened global economy. This would be an unwelcome development as economies begin to look toward recovery beyond the global health crisis. The Democratic challenger says he will negotiate aggressively with China. However, it’s expected that U.S./China relations would improve during a Biden presidency.
What Happens if the Presidential Election Is Contested?
The final, and very sobering, concern as we head into the campaign season’s final weeks is the growing possibility of a contested election. In the case of a close result, or in disputed results from mail-in and absentee ballots, we might see the failure to achieve a peaceful transition of power for the first time in U.S. history. Such an event would very likely upset global markets considerably until the U.S. reaches an accepted resolution.
The current market uncertainty is significant and distracting. However, we don’t think it’s in anyone’s best interest to try and predict the U.S. election’s results. Instead, we continue to focus on the specific business case for each stock we select for our portfolios. Likewise, we think investors should consider doing the same—take a longer-term view and stick to an investment plan.
My wife Amy’s opening. Kansas City’s Newest winery. You can look her up at www.serendipityfarmandvine.com or on Facebook at @serendipityfarmandvine
***Open enrollment for Medicare is coming up. Here is a referral for you…
As an independent insurance agent that contracts with major carriers, I can help you decide which plan is right for YOU! Whether you are in the market for Medicare Supplements, Prescription Drug Plans, Advantage Plans, or just want to know your options, I can guide you through the process.
Community Café is Wednesday, October 28 at 8:00am for 30 minutes. Topic will be on: “How Has COVID Affected Your Office/Team”
- Will live stream on Facebook Live anyone who is friends with me on Facebook or Click Here to Follow The Community Café Facebook Page
- Invitations will go out via email with a link to join on zoom.us, plus those who are friends with me on Facebook
- Speaker this week, Glenn Stockton, Mark Roberts & Christian Toman
- Invitations will go out via email with a link to join on zoom.us, plus those who are friends with me on Facebook
Estate Planning Webinar Tuesday November 10 at 6:00pm, Wednesday November 11 at 11:00am & Saturday November 14 at 10:00am
To Register for either date please email Stacy at [email protected]
- Pros and cons of a Will based estate plan
- Pros and cons of a Trust based estate plan
- Co-hosted by Glenn Stockton with Stockton & Stern Law firm
Social Security and Tax Strategy Webinar on Tuesday October 27 at 6:00pm and Wednesday October 28 at 11:00am
To Register for either date please 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. [email protected]
Referral rewards program:
Mark Roberts, President
Affinity Asset Management
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Overland Park, KS 66213
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