Good morning,
Today’s email is coming to you from Angela Hudson here in the office as Mark may have fractured wrist and cannot type (ouch!). He is going in to get an X-ray a little later on today and we wish him a speedy recovery. He is standing behind me 6 feet away and KEEPS asking me to enlarge the font so he can see.
Performance DJIA:
Mon 4/20 -2.44%
Tues 4/21 -2.67%
Wed 4/22 +1.99%
Thurs 4/23 +0.17%
Fri 4/24 +1.11%
Last week -1.93%
Since 3/11 day before selling + 0.94%
Since 2/19 market high – 18.99%
Bond model you are in:
Last week – 0.26%
Since bought in -0.9%
Tid Bits:
To encourage charitable giving in 2020, the CARES Act includes two tax provisions that reward people who donate to charity
First, a new “above-the-line” deduction of up to $300 is allowed for cash donations to charity in 2020. Donations to donor advised funds and certain organizations that support charities are not deductible. You can’t claim this deduction if you itemize deductions on your 2020 tax return (i.e., you must claim the standard deduction).
For taxpayers who do itemized on their 2020 return, the 60% of adjusted gross income limit that normally applies to cash contributions is waived. That means you can deduct more of your charitable cash contributions this year. As with the new above-the-line deduction, donations to donor advised funds and supporting organizations don’t count
One of Affinity’s favorite tidbits: Most people will turn from hoarding TP and start hoarding cash as people will naturally change their savings and spending habits. If they get a job, extra income will now go into savings, not buying the next $1,000 Iphone. That has a positive impact on the individual but in return and a negative impact on the economy and the timeline of its rebound.
Thank you again to everyone for sending emails for service requests. We get flooded after these Monday emails and Wednesday teleconferences. This helps us to minimize delays.
Affinity Asset Management is still business as usual. We are all working in casual clothes as our building is locked up and we are not seeing clients in person. Signatures are no problem. Many things can be emailed for signatures and when there are too many documents, we have clients come to the office, and we meet them in the parking lot so they can sign the forms in their cars.
Facts:
Coronavirus
Global 3,012,501 cases 207,885 deaths
US 987,322 cases 55,415 deaths (+14,795, 36% increase from last week)
KS 3,174 cases 120 deaths
MO 7,029 cases 283 deaths
Second round of the Cares Act was singed into place
The White House and Congress reached a deal to extend the Paycheck Protection Program. The plan includes a near doubling of the size of the small-business loan program ($300 billion), as well as providing additional funding for hospitals ($75 billion), disaster loans ($25 billion), and the federal coronavirus testing program ($25 billion). The fiscal spending, combined with the monetary stimulus, amounts to over 20% of US GDP.
Stay at home order
Kansas – Governor Laura Kelly has said she plans on releasing a phased plan to re-open the state soon, but has not said when that could be. But court documents indicate she will not extend the current Stay-at-Home order meaning the state could start reopening on May 4th.
Missouri – Governor Parson will introduce the reopening order next week, which will take effect on Monday, May 4.
Another 4.4 million Americans filed for unemployment last week, Labor Department report
Coronavirus versus 2008 Great Recession
Highlights from analysts and economists:
CBO Congressional Budget Office
Inflation-adjusted gross domestic product (real GDP) is expected to decline by about 12% during the second quarter, equivalent to a decline at an annual rate of 40% for that quarter
GDP, adjusted for inflation, is expected to decline 5.6% for the calendar year, on a fourth-quarter to fourth-quarter basis, its biggest drop since 1946.
The unemployment rate is expected to average at close to 14% during the second quarter and remain elevated for the rest of the year — 15% in the third quarter and 11% in the fourth
Projected loss of nearly 27 million people employed in the second and third quarters and the exit of roughly 8 million people from the labor force
The federal budget deficit is projected to be $3.7 trillion
CBO also expects interest rates “to remain quite low” compared to rates in recent decades during the economic contraction. (It doesn’t use the word “recession.”)
Invesco
The S&P 500 Index rally has been driven by: 1) a massive policy response; 2) modestly better hospitalization and new cases numbers in many of the hardest-hit areas of the country; 3) hope for potential treatments; and 4) the reality that many of the large market-capitalization companies are reasonably well positioned for the current environment
What’s the near-term cost of the shutdown and how did it likely impact US Gross Domestic Product (GDP) in the first quarter of 2020?
The size of the US economy is about $20 trillion, which equates to roughly $370 billion per week ($20 trillion/52). If half the economy was shut down for four weeks, that would imply a 10%-15% quarter-over-quarter drop in 1Q20 GDP, at an annualized rate. Eight weeks would imply a 25%-30% drop. Clearly, the shutdown becomes more costly with each passing week. Congress’s $2 trillion-plus package is roughly 10% of US GDP, providing a cushion for the first weeks of the shutdown. More stimulus is likely in the offing.
Blackrock
Our latest analysis shows the near-term impact on growth to be far greater than that of the Global Financial Crisis (GFC) – and the largest contraction since the Great Depression. But the cumulative impact over time may only be a fraction of the GFC, provided policy makers are successful in preventing the shock from morphing into more systemic financial pressures. Overall, the financial system is in much better shape than in 2007. The more prolonged the shutdown – the greater the likelihood that cracks appear, exposing hidden financial vulnerabilities that could lead to more permanent damage. For now, we believe that the bold and broad policy response is limiting this risk and implementation of policy support is key. Over a longer horizon, several sectors may face profound levels of long-term disruption including air travel, fossil energy, healthcare, retail, and government regulations. The pandemic adds to the trade tensions in compelling companies to rethink their global manufacturing footprints. This combination of supply shocks could weigh on growth, increase production costs, pressure profit margins and drive up inflation.
American Century
The “known unknown” is the extent of the spread and human cost of the virus itself. A steady, rolling contagion across the U.S., Europe and other leading economies would almost certainly precipitate a prolonged slowdown. The recovery, too, would likely be more gradual than any V-shaped scenario. In addition, the virus strikes at a vulnerable moment—rising tariffs were already acting as sand in the gears of global trade. The virus is only accelerating this trend toward deglobalization as countries erect additional barriers to stave off or limit the impact of the disease on their shores.
Opportunities:
Roth Conversions
There are 2 ways we can implement your Roth conversion
Selling the investments within the IRA, transfer the funds cash, then buying new investments once the funds are within the Roth-IRA (if it’s a good investment to sell, its not a good investment to buy)
ACAT (transfer in kind) means we simply transfer the investment shares from your IRA directly into your Roth-IRA without having to sell or buy each investment
When all models are in bonds (like we are now during coronavirus) there is no need to sell or buy meaning we execute the trade via ACAT
Under different market conditions, depending on what the market is doing and your portfolio is diversified between stocks and bonds, sometimes we will sell then buy. Depending on what is in the best interest of the account
Taking withdrawals
We never want to discourage you for taking withdrawals. However, the more you leave in the account, the more you will have working for you in our diversified investment mixture when the market goes up. If you need money always feel free to give us a call so that we can collaborate on what is best for your specific situation
Referrals
We want to continue to encourage referrals, especially in a time like this, but while also following the strict guidelines compliance has in place on referrals. That being said, last Wednesday, April 22nd 2020, for every 10 referrals we receive from clients we will do a random drawing and 9 out of 10 people will win an Amazon gift card. (Compliances does require that it be random drawings but we are able to can create higher odds, like 9 out of 10 winners)
Please help us help others
If you are still working, call your 401K company, (not your HR department of your employer) and ask if you have access to an “in-service rollover”. And if you do, let us know ASAP as there are potential large benefits that you don’t have at work in that 401K.
We are being told by our broker/dealer, Client One Securities (CIS), that your brokerage accounts should now be able to integrate with your personal tax software for those who do their own tax returns. Any problems or questions on this, can be directed to C1S directly at 913-814-6097
Reminders:
Michael Turner with American Century will be joining us for this Wednesday’s edition of our weekly teleconference. I will speak for about 15-20 minutes, then he will speak for the next 15-20 minutes, then Q&A to follow. Michael’s topics are as follows
Fixed income – intermediate term impact of QE Infinity
Dividend/Share buy back repercussions
Reason for Optimism
“Trusted Contact Form” you received by C1S. Just fill out one per person and mail them back in the same envelope. This form is a new regulation in our industry, helping us as your advisor and C1S. In the event you don’t return our calls, emails, or text messages, and this is uncharacteristic of you, then you are giving us another name and number of someone who might know how to reach you. That’s all. This person doesn’t not have access to anything with your accounts.
Any service work you would like us to do for you, please email your request to us.
Thank you for your time in reading these updates.
Please share them with anyone you want to help
Stay safe and stay healthy.
Mark Roberts/Angela Hudson
