News You Can Use Updates

May 18, 2020

Losing your job can be a frightening proposition any time it happens, but being unemployed during these uncertain times adds a whole new level of stress and anxiety.  Given the staggering unemployment numbers we're seeing, there is a decent probability that you or someone you know has been downsized- or may be in the future.
 
If you find yourself out of work, there are a few important things to do right away.
 
- File for unemployment benefits immediately.  Don't be embarrassed about it.  It's not your fault that you lost your job, and millions of other Americans find themselves in a position that they never envisioned being in.  The recent stimulus package increased benefits by $600 a week for the first four months.  Eligibility has also been expanded to freelance and furloughed workers who were not previously able to collect.
 
- Figure out how your company's health insurance will work.  COBRA coverage allows you to continue your employer's medical coverage for a specified period of time, but you should find out how much it costs and how long it will last.
 
- Don't cash in your 401(k)!  It might be tempting to take your balance in cash now that you are without a paycheck, but make sure you understand your options and the tax ramifications of each.  You can roll it over to an IRA, leave it where it is or take it in cash.  Talk to your financial advisor about the pros and cons of each.
 

- Find out if you have any company stock, options, accrued sick or vacation time or other financial benefits that you are entitled to.  Don't walk away from money that is owed to you.

 
April 17, 2020
 
We vividly recall the financial crisis of 2008. The economy was quickly contracting, several financial institutions required bailouts, layoffs abounded, and the stock market plunged.
 
But we weren't grappling with fear tied to a health crisis then. We could attend the theater, eat at a restaurant, travel, or enjoy a live sports event. The roots of today's crisis are different, and nowadays we are in the midst of both an economic and health crisis. Activities outside the home have been greatly curtailed.
 
It's unsettling for everyone.
 
As we are all aware, the speed of the decline in stocks has been swift. Since the February 19 peak, the S&P 500 Index shed 34%, plummeting to its most recent low on March 23 (St. Louis Federal Reserve data).  
 
The pace of the sell-off can be traced to the enormous amount of uncertainty tied to shutting down major portions of the economy. What will its ultimate impact be? The brightest minds continue to debate this.
 
We don't know what might happen next year, but the long-term historical trend has been favorable. Let's continue to keep our long-term financial goals in mind, even during these trying times.
 
Since last month's low, the S&P 500 Index rallied 25% through April 9. Technically, a 20% rally from the market's bottom constitutes a new bull market-technically. As of April 9, the S&P 500 Index was a modest 16% below its February 19 peak (St. Louis Fed data). The recovery has been cautiously encouraging, and I believe there are three variables that can be cited.  
 
First, the federal government passed the CARES Act. The bill includes over $2 trillion in spending, generous jobless benefits, loans and grants to businesses, stimulus checks, and more. It offers a much more aggressive response than in 2008. More will be needed, but it's a good start.
 
Second, the Federal Reserve has aggressively responded. Pre-crisis, there were questions whether the Fed had the necessary tools in its tool kit, given that interest rates were already low. Apparently, they do.
 
With much greater speed than in 2008, the Fed has launched numerous programs aimed at propping up the economy-from big business to Main Street.
 
The two-pronged attack has not been executed flawlessly, but it has cautiously encouraged investors to dip their toes back into stocks. While the economic outlook remains fluid, investors are trying to discern some form of an economic recovery in the second half of the year.
 
Third, there are signs the virus may be peaking. An April 12 headline in Bloomberg News offered a cautiously upbeat headline: "CDC Says U.S. Near Peak; 70 Vaccines in Pipeline." With signs that new cases may be peaking, talk is surfacing over how to best reopen shuttered industries.
 
That said, remember, no one rings a bell that sounds the all-clear signal. Collectively, markets attempt to price in future events. I would expect large daily swings, both to the upside and downside, to continue amid the uncertainty.
 
We don't know if we'll see an uptick in new cases this summer when the economy reopens. We don't know if an effective treatment will be developed or how quickly a vaccine might come online.
 
And, for that matter, we don't know how quickly most folks will venture back into restaurants, airplanes or the public square.  
 
We are living in a world that nobody could possibly have envisioned a few months ago. The impact caused by the virus has disrupted life around the globe. We have friends and loved ones who are dealing with this disease. It's incredibly unpleasant.
 
Yet, unexpected blessings have surfaced. People are reaching out to family and friends via texting and emails. Some are even connecting the old-fashioned way-by phone.  
 
Families are closer than they have ever been before. Activities and jobs around the country have been suspended but not ended. And I am confident we will see an economic recovery take root and the pandemic will subside.  
 
We are a resilient people. Together we will get through this dark night, and we will be stronger for it.
 
 
April 16, 2020
 
- Unfortunately, this crisis has brought out the worst in some people.  There are reports of scams going on, especially with regard to Social Security and the new government programs designed to help people through the pandemic.   As always, be very careful about incoming calls and emails pretending to be from a government authority or agency.  Other tips can be found in this article from the Boston Globe
 
- You probably already know that the deadline for filing your 2019 tax return has been pushed back to July 15th.  If you generally pay estimated quarterly taxes, the first and second quarter due dates have now also been changed to July 15th.
 
- If you are waiting on your Economic Relief payment either by direct deposit or check, you can now check on the status at the IRS website.
 
 
April 9, 2020
 
While the volatility we've become accustomed to lately has continued, it does seem like there have been more good days than bad recently on Wall Street.  Major stock indices are well off their recent lows and there are some indications that COVID-19 infections are very close to peaking.  Some are suggesting that fewer people will be infected and die from the Coronavirus than some earlier models had indicated.  On top of that, Bernie Sanders announced he was ending his bid for the Democratic nomination.  This was perhaps already a foregone conclusion, but for investors who worried about tax increases and his perceived anti-business platform, this was good news.
 
We welcome any positive news regarding the global pandemic, but know there are still difficult times ahead and questions about what the economy will look like when we resume some semblance of normalcy.
 
Will Americans flock to restaurants and malls as soon as they are able or will they remain cautious?  Will businesses begin hiring in earnest or will they take a wait-and-see approach to how things evolve?  Will sports fans pack stadiums and arenas as they always have or will they be reluctant to spend two or three hours closely surrounded by thousands of strangers?  Will anyone take a real summer vacation this year?
 
From an investment standpoint, we are seeing- at least from our clients- that people are far less panicked than during the last financial crisis.  They want to know that they have money available if they need it in the short-term, but largely believe that investment portfolios will go back up in time and they just need to be patient.
 
Many Americans are now experiencing day-to-day hardships that they've never encountered before.  Successful small business owners have to lay off valuable employees and wonder if they'll be able to pay next month's rent.  People with excellent credit are suddenly unemployed and struggling to pay their mortgage.  For the first time in their lives, some are filing for unemployment benefits.

There is some help now available as a result of the recent Coronavirus-related stimulus package.  Below, we have listed some resources and information for individuals and business owners, but please feel free to contact us if you have any questions about your financial situation or programs available to you.

 
April 8, 2020
 
This article is on the experian.com website and gives information about the one-time stimulus payments- who is eligible, what are the income limitations, etc.
 
 
Small business owners are eligible for the new Payroll Protection Program.  These federally-backed loans are potentially forgivable if employers keep all employees on the payroll for 8 weeks and the money is used for payroll, rent, mortgage interest or utilities.
 
 
 
April 6, 2020
 
I saw this article in the Wall Street Journal this morning about what to do if you are struggling to pay your mortgage due to coronavirus-related hardships.
 
 
 
 
March 31, 2020
 
After an encouraging week for stocks last week in which the markets were up 18%, investors may be asking, "Is the worst behind us?"  Even with a positive start Monday, I would continue to temper expectations and preach patience.
 
During times like this, it is not unusual for there to be short-term rallies in the midst of longer-term market slumps.  So, do I think the worst is behind us?  I don't.  Those of you who have known me for a while know I tend to be a bit cautious about the short-term but much more optimistic about the long-term.   
 
Because there is still so much uncertainty about the spread of the Coronavirus, its economic impact and eventual containment, I would expect significant volatility for several months.  That is not to say that all the volatility will be in the negative direction, but there could be more big ups and downs ahead.
 
According to analysts at Goldman Sachs, there are three things that need to happen before stocks hit their lows.  I'll summarize, but you can read the entire article from MarketWatch here.
 
1. The virus spread in the US must begin to slow so that the ultimate impact on the economy can be understood.
 
2. There must be evidence that the recent measures by Congress and the Federal Reserve are sufficient.
 
3. Investor sentiment and positioning must bottom out.
 
As was evidenced last week, stock rallies can be fast and furious.  The best way to ensure that you don't miss out is to not get out of stocks when markets are bad.  By now, many of you have probably seen the statistics indicating that missing even a few of the first days of an extended market rally are enough to significantly curtail your portfolio's long-term performance.  As we often say, time in the market is much more important than timing the market.
 
 
 
March 30, 2020
 
- Massachusetts has now delayed its tax-filing deadline to July 15th to coincide with the federal deadline.  You also have until that date to make IRA contributions for 2019.
 
- The Department of Homeland Security has pushed back the deadline for the Real ID to October 2021.  The original deadline was October 1, 2020.  The Real ID will eventually be needed for domestic air travel and for getting onto military bases or secure federal facilities.
 
 
March 27, 2020
 
How much money could you receive from the Coronavirus relief bill?
 
 
 
March 26, 2020
 
It was previously announced that you now have until July 15 to file and pay federal taxes without penalty or interest.  As a followup, you also have until July 15 to fund IRAs for 2019.  At the time of this writing, Massachusetts and some other states are sticking with the April 15th deadline, but I would expect that this may change very soon.
 
There are some provisions in the stimulus package that pertain to retirement accounts:   
 
- If you have not already taken your Required Minimum Distribution (RMD) for 2020, you may refrain from taking it this year.  While some clients have already taken their RMD earlier in the year and others rely on the annual withdrawal for income, those who don't need the cash can keep the money invested.  This may prevent clients from being forced to sell stocks or mutual funds in a down market.
 
- Loans from 401k plans are capped at 50% of account value or $50,000, but the maximum loan value is now being raised to $100,000. 
 
- The 10% IRS early withdrawal penalty on IRAs for people under the age of 59 1/2, is being waived for some coronavirus-related exceptions.  This applies to withdrawals up to $100,000 and requires a hardship related to COVID-19.  I expect there will be some guidance from the IRS in the coming days.
 
More information can be found in this article posted yesterday on cnbc.com
 
 
 
March 25, 2020
 
The following article, published yesterday in the New York Times, has a ton of helpful information for people that may be suffering financially due to the Coronavirus crisis.  Help topics include:
 
- how to apply for unemployment insurance
- the new paid leave law
- what to do about student loans
- help for renters and homeowners and more.
 
 
If you know anyone who could use some financial advice during this difficult time, we are offering free 30 minute phone consultations.  Feel free to pass that along.
 
 
 
March 20, 2020
 
We thought we'd share some news and updates that you may find helpful.
 
- First, it was announced this morning that the federal tax-filing deadline has been pushed back to July 15th.  This follows the earlier news that Americans could delay paying owed taxes until July 15th.  So, now you have until July to file
and pay taxes without penalty or interest.  At this time, Massachusetts and other states are sticking with the April 15th deadline, but I would expect that this may change soon.
 
- For business owners affected by the economic impact of the Coronavirus, the US Small Business Administration is providing low-interest loans for those who don't have credit available elsewhere.  For more information or to apply for assistance, go to https://www.sba.gov/funding-programs/disaster-assistance.
 
- Some clients who have non-retirement accounts have the option to open a securities-backed line of credit (SBLOC). 
 
An SBLOC offers flexibility and convenient access to your funds through a revolving line of credit secured by the assets in the SEI portfolio. The SBLOC lets you access the value of your  investment portfolio without disrupting your carefully constructed investment strategy- or forcing you to sell stocks while the market is down.
 
An SBLOC is ideal for clients who need access to funds for real estate purchases, tuition payments, taxes or other large expenses - anything except the purchase of additional securities. Since the portfolio is held as collateral, you may avoid potential tax consequences associated with liquidating assets.
 
Applying for an SBLOC involves minimal paperwork and there are no application or set up fees.   No interest will be charged until the line is in use, and there are no annual maintenance fees for simply having the line in place.  If you would like more information, please let us know.  
 
- And last, if you own a Traditional IRA it may be worth considering a Roth IRA conversion.  With account values lower and some people facing a year earning less income than in the past, the tax implications may not be as significant.  Any amount converted from a Traditional to Roth IRA is taxable, but once in the Roth, earnings grow tax-deferred and qualified withdrawals during retirement are tax-free (as opposed to being taxed as ordinary income with a Traditional IRA).  If you want to see if this could make sense for you, give us a call and we'll take a look at the pros and cons of a conversion. 
 
 
 
March 18, 2020
 
Based on the continuously changing recommendations and guidance from state and federal officials, we have decided to temporarily refrain from conducting client meetings in our offices. As many of you know, we share our office with a small law firm and a CPA practice.   We have jointly agreed to close the office to visitors to keep below the recommended guideline of 10 people or less in a confined area.
 
We are available for meetings and conversations over the phone or by video conference, and are working to respond to your emails and calls as quickly as possible.
 
Over the past few weeks, some people have begun to have flashbacks to the financial crisis of 2008. While the anxious feelings and sinking stocks may seem familiar, this is certainly different. So far, the current effects on the market are less severe than the effects of the 2008 crisis. For comparison, as of now stocks have fallen around 30% from their peak, compared with a 59% peak to bottom during the financial crisis. Another significant difference between the current situation and the financial crisis is that the financial crisis came from systemic bad practices within the financial system, while our banks are currently on very good footing and the current situation is inspired by a health crisis which, however dire, will pass.
 
The critical difference is that today, while the immediate future is relatively uncertain, it is fairly certain that within the next three to six months the situation will resolve itself. In contrast, the financial crisis was a period of great uncertainty where both the short- and long-term behavior of the market and the economy were complete mysteries and required remedial measures for years afterwards. 
 
The current market distress is most directly related to the uncertainty surrounding the future of the coronavirus- and not underlying economic weakness. I would expect that stocks will continue to be volatile until confirmed cases of the virus peak and then begin to show a sustained decline. This may be several weeks away.
 
With several large industries hurting now- and others expected to suffer as a result of the aggressive business closures and guidance to "flatten the curve-" we may enter a recession. It is likely to be short-lived and may qualify only as a "technical recession." Economic data was sound in January and February.  Based on how economists classify a recession, we may not know we had one until it's over- and stocks tend to begin rising again before that ever happens.
 
Stay safe and feel free to reach to us about any questions or concerns.
 
March 12, 2020
Since our last update, the panic around the coronavirus- and its financial implications- has only intensified.
As we talk and email with clients, we are asking them to consider the question, "How does this affect me?"   We are not talking about the health issues related to the virus, of course, but the financial ones... 
To help you think about the financial impact on your investments, here are a few key points and thoughts:
- The stock market, as measured by the S&P 500 Index, has enjoyed the longest bull market ever, culminating with an all-time high on February 19th.  As of this writing on March 12, it has fallen about 20% since then.  So while stocks are down sharply over the last three weeks, they have rewarded investors nicely since the end of the mortgage and banking crisis in 2009.  Just last year, the market was up over 30%. 
- Clients with diversified portfolios own some stocks, but likely also own some bonds and may have cash in their accounts too.  Bond prices have generally increased since this crisis began.  When you hear on the news that "bond yields are falling," that means that bond prices are increasing.   Bond yields and bond prices are inversely correlated.   
- For clients who are investing for a long-term goal like retirement, times like this can obviously be stressful, but history has shown us that markets often recover as quickly  as they fall.  It's easy to forget how bad things looked in 2008 and 2009.  Stocks were down, real estate was down and even bonds were down at times.  Investors who remained calm and patient- and didn't sell out when the market was low- were glad they stood pat as values increased considerably over the next decade plus.
- If you need to withdraw money from your accounts while the stock market is plunging, we may consider generating the cash from your more conservative holdings like bonds, rather than having to sell stocks when they're lower.    
- The media has people whipped up into a frenzy and it's the stark headlines and "Breaking News" alerts that put people on edge.  However, everyday there are also news stories and articles with advice about what you should be doing with your investments now.  It's hard to find one that says something different than some variation of, "Sit tight and wait for it to be over."  In our opinion, that is the best advice right now.  A stock market decline has been largely anticipated for a few years now- obviously no one knew when or for what reason.  If you own a variety of investments such as stocks, bonds, money markets, real estate and annuities, you have proactively prepared for this, so that you don't need to overreact now.  Emotion often drives investor behavior at times like this, so remembering the big picture and basic fundamentals of investing will help you keep your head about you.
 
February 28, 2020
As we wrap up the worst week for stocks since 2008, we thought we'd share some thoughts and perspective.
 
The market had been on a historic run since the end of the financial crisis and we were probably overdue for a slump.  That said, obviously no one could foresee the panic that the Coronavirus would cause this week.
 
We have officially entered into what's known as a market "correction-" a drop of 10% in a major index, typically the S&P 500 or the Dow Jones Industrial Average.  While corrections are normal, this one has come quickly.  There have been 26 corrections since World War II, the most recent occurring in December 2018.  The average decline during a correction has been 13% and it typically take 4 months to recover.
 
So while the worries about the Coronavirus have taken center stage, the market drop has gotten some people concerned about other economic things too- things like "Stocks are too expensive and we're headed for a recession," and "What if Bernie wins?!?"
 
The media does a great job of scaring people into thinking that their life savings is about to vanish and that retirement is now a pipe dream.  While any sudden drop in stock prices can be disconcerting, I believe the hype is being overblown.
 
On average, stocks go up about 2/3 of the time- and they go down about 1/3 of the time.  Stocks have rewarded investors handsomely in the past decade.  Over the past few years, we have generally taken opportunities to take some profits as stocks reached new highs and reallocate to more conservative assets like bonds.  During meetings and conversations with clients, we often talked about diversification and the importance of asset allocation.  When stocks were hitting all-time highs, it was tempting to get MORE aggressive and ride the wave, but we believe that sticking to a diversified portfolio with a long-term perspective was the more prudent course of action.
 
To answer a few questions we've been hearing this week:
 
Should I be selling out of my stocks now?
For many reasons, the answer is no.  First, the worst time to sell stocks is when the market is down.  The people who still lament their investment results from the last financial crisis are those who sold in a panic and subsequently missed out on the recovery.  The bounce backs happen as quickly and as dramatically as the drops do and missing out on even just the beginning of a stock market surge can be detrimental to your overall returns.  Secondly, stocks make up only a portion of your portfolio.  Typically, other asset classes will remain more stable during market declines.  Yes, bonds are boring, but there is a reason we have them in your account.  And third, attempting to time the market (sell at the height and buy at the bottom) has proven over the years to be nearly impossible to execute successfully.  Your time in the market, as well as your overall diversification, have proven to be the greatest drivers of investment success.
 
Should I be buying stocks now?
Some clients have asked about "buying the dip."  That is, with the big drop this week, does it make sense to add to my stock allocation while prices are lower?  While everyone's situation is different, we are generally not advising that yet.  With the market down about 10% at the time of this writing, we believe it's possible that the market could remain unsettled and drop further in the next few weeks.  If we get to a point where stocks are lower by 20% from their peak, we may consider adding to stock allocations.  Now, if you are adding to your account through a 401k plan or a systematic monthly investment, buying stocks now is fine.  You are doing what experts call "dollar-cost-averaging" or adding regular amounts to stock funds at timed intervals.  This won't prevent losses in the short-term, but it tends to reduce volatility in your portfolio, and even has you buying shares while they are less expensive.
 
What should we be doing?
When we design client portfolios and subsequently make adjustments over time, we are proactively preparing for positive or negative economic outcomes.  We do it, so at times like this, we are not forced to react to market news and can remain level-headed with regard to our clients' financial plans.  We are closely monitoring current events as they relate to financial markets and if we see what we believe to be opportunities to improve your account, we will discuss these strategies with you.  Since I have been in the business, I have witnessed three recessions, the bursting of the "dot-com" bubble, 9/11 and the sub-prime mortgage and banking crisis.  We have survived the short-term damage from these events and have become wiser and less-reactive as a result of the experiences.  This too shall pass...