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Five Things to Know This Week

Five Things to Know This Week

1. Market Update

Warren Buffet said it best: “Be fearful when others are greedy. Be greedy when others are fearful.” Market (investor) sentiment is defined as the overall attitude of investors toward a particular security or financial market. It is the feeling or tone of the market, or crowd psychology, as revealed through the activity and price movement of the securities trading in that market ( June 25, 2019).
Courtesy of the Fed and fiscal stimulus, the S&P 500 has rallied back ~33% since the March 23rd low. Even with this rally, we are still 10% below the market peak on February 19th. With what seemed like positive job numbers in May, even at a debatable unemployment rate of 13%, the market continued its surge. This is all a reflection of investor sentiment.
Our first investment committee meeting in June reflected Buffet’s statement to be fearful when others are greedy. Looking at the extreme optimism in investor sentiment, we decided to reduce the S&P 500, Dow Jones, and NASDAQ holdings in your portfolios on June 5th. On June 11th, the market dropped 6%. We are now holding cash “to be greedy when others are fearful.” We will be sending out an email expanding our thoughts on the market outlook and what we have done to protect your portfolios later this week.

2. Unemployment

The most recent Initial Jobless Claims Report was better than estimated; however, how much better has it really gotten? According to the Department of Labor, the US weekly jobless claims were better than expected at 1.54 million versus 1.6 million estimated, which was a decrease of 355,000 from the previous week’s report. In addition, the insured unemployment rate was 14.4%, a decrease of 0.2% from the previous week. Both of these results show some improvement, but the previous week’s initial jobless claims were still revised upward by 20,000. Though the report was slightly better than estimates, we remain cautious, more so than market thinking, as we believe the unemployment rate will likely take longer to recover to levels seen in the beginning of this year.

These numbers do not reflect the large percentage of workers who have been furloughed and do not know if they will return to work or be left jobless. We agree with the majority of economists that the true number of jobless Americans is much closer to 19%. We will continue to monitor this important data to determine the strength of the recovery going forward.

3. Are You Pondering Retirement in Another State?

Financially, we will always have you consider four factors to determine the optimal state to choose for retirement living: 1. Health care; 2. Taxes; 3. Quality of life; and, 4. Cost of living. Most consider taxes as the number one reason to move somewhere. Our view is taxes tend to equal services if managed right. If you don’t pay taxes, don’t expect services, and retirement is the time in which you need services the most. Quality of health care should be top on your list. We are happy to have a much more detailed discussion on this, so if you are considering retirement in another state, consider these four factors to determine how your dream state will support your lifestyle. We are here to help and happy to guide you so that you have the most fun and greatest health at the lowest cost through retirement.

4. Individual Account Power of Attorney

As proven by the recent pandemic, disability can occur very suddenly. Since an individual brokerage account can only be accessed by the account owner, there is a danger if you need to withdraw cash, write a check, or make a change to the account when you’re unable to do so. A solution to this potential difficulty is to add a Durable Power of Attorney to your brokerage account. This can be accomplished easily by completing a form provided by your account’s custodian (i.e., Charles Schwab) and doesn’t require an attorney to prepare documents. As the account owner, you grant a trusted agent (or agents) authority to act for you. This authority is in effect until you, the account owner, rescind it.

5. PPP Flexibility Act

Did your business receive a PPP loan? If so, it’s important to note that there were changes to the SBA rules about the spending of that money in the new PPP Flexibility Act.

  • The covered period to use this money has gone from 8 weeks to 24 weeks (or December 31st, whichever comes sooner). The original 8 week covered period can be used, but then you may be waiting for a forgiveness application to come out to apply.
  • The amount has changed by 75% to 60% that MUST be used for payroll. If at least 60% is not used toward payroll, NONE of the PPP money is forgiven.
  • FTEs – June 30th was the safe harbor date to rehire employees by. This has now been moved to December 31st. In addition to pushing back the date, there is relief from this rule if your business was prohibited from opening by the government or cannot return to the same level of business.
  • Originally, if you received PPP money, you were not allowed to take advantage of deferring payment of certain payroll taxes. Now employers can defer the 6.2% share of the 2020 Social Security tax until the end of 2021 (50%) and 2022 (50%).

As always, we are here as a resource for those that you care about and for. If you are worried that your family and/or friends may have been given improper financial guidance or are losing their hard-earned assets, we are available for a free second opinion or guidance to make sure they stay financially safe.

Be well and have a wonderful week!