It took just under five months for it to happen. On August 17th, the S&P 500 closed at 3389.78—an all-time record. That record is also significant because it means the index officially recouped all losses from the downturn that happened in March.1
This year has been a rollercoaster ride for investors. The S&P 500 dropped 33.92% from February 19 to March 23 as the COVID-19 pandemic hit the United States. Since March 23, the index has increased 51.51%, triggering a new bull market.2
However, a sharp increase in the stock market doesn’t mean the U.S. economy is out of the woods. In fact, other metrics would indicate that the economy is still struggling. In the second quarter, gross domestic product contracted at an annual rate of 32.9%, the largest quarterly contraction on record. That contraction is more than three times the previous record—a 10% contraction in 1958.3
Also, not all sectors of the stock market have participated in the recovery. The increase over the last five months has been fueled by growth in the Information Technology (IT) and Consumer Discretionary sectors, each of which are up more than 23% year-to-date. However, other sectors, particularly Financials and Energy, are negative on the year. In fact, of the 11 S&P 500 Sectors, five are still negative on the year.4
The 4th Quarter is historically the best quarter for S&P 500 performance, with the index up an average of 3.51% from October through December over the past 30 years.5 However, 2020 is not like other years. There are factors and risks that could threaten the market’s recovery. Below are a couple things to watch as the year comes to a close:
We’re only a couple months away from the election, as if 2020 needed more uncertainty. Everyone has their own preferred candidate. However, some investment managers are saying the real risk isn’t one of the candidates winning, it’s an unclear outcome.
Bridgewater Associates, which manages more than $140 billion, recently told clients the real risk is if there is “material concern over the legitimacy of the process.” Analysis of recent options transactions show that many investors are taking protective stances through January 2021, possibly an indication they are concerned about post-election volatility.6
However, UBS notes that post-election volatility is often short-lived. They point to the most recent example of an election with an unclear winner—the 2000 election between Al Gore and George W. Bush. During that time, the S&P 500 fell around 6% in the weeks after the election as litigation mounted. However, those losses were erased as soon as the election reached resolution.7
Of course, the other major risk to the economy and financial markets in the fourth quarter is developments related to COVID. The pandemic is now in its seventh month. As of mid-August, the death toll in the United States exceeded 168,000, with more than 5 million confirmed cases.8
The development of a vaccine in the fourth quarter could deliver a boost to the economy. The government has implemented Operation Warp Speed, an initiative to deliver 300 million vaccines by January. Moderna has a vaccine in phase 3 trials, but it is uncertain whether the company will be able to meet the government’s target date.8
Ready to protect your portfolio from fourth quarter uncertainty? Let’s talk about it. Contact us today at Retirement Advisers.Net. We can analyze your needs and goals and implement a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20365 – 2020/8/20
This year hasn’t been easy on us, and the IRS is having its share of troubles too. Due to shutdowns this spring, the mail has been piling up in IRS mailrooms. This summer, 12 million envelopes had yet to be opened. Unfortunately, that might mean that the check or money order you sent to them has yet to be discovered.
Money orders can be particularly problematic. Since they must be cashed within 60 days, many are rejected once the IRS does finally deposit them. Then the taxpayer receives a notice, submits a new check or money order, and the process begins again.
In other cases, the submitted payments simply have not been opened yet.
The end result is that taxpayers are now receiving automated notices of missing or late payments, but you shouldn’t panic. The IRS is aware of this problem, and have policies in place to protect you, such as:
If you do receive a notice of unpaid taxes, contact your tax professional immediately. In many cases they might be able to clear up the mess for you.
If you filed taxes yourself, canceling the check can trigger a bad check penalty from the IRS when they do deposit it. Instead, you can call the IRS to let them know you did file your taxes and send the payment. Once their backlog is cleared, you will be able to prove your timely payment and late fees should be waived.
In other words, these notices are usually nothing to worry about. If you did indeed file and pay on time, the IRS just needs more time to work out the kinks in their system. Only those who truly filed and paid late will ultimately owe a penalty.
By 2030, all Baby Boomers will be 65 or older. So throughout this decade, many of you will be reaching an important milestone. As your 65 birthday approaches, make sure you address these four steps for better retirement preparedness.
Make a plan for Social Security. If you were born in 1955 or later, Social Security defines your full retirement age as 66 or 67 (depending upon your exact birth date). So, the old assumption that you can retire at 65 is not entirely true. You can claim benefits early, but they will be permanently reduced.
Or, you can wait until your full retirement age and claim your full scheduled benefits. Those who wait until age 70 will enjoy monthly payments that are about 30 percent higher than they would have been, if they had claimed them at 66.
For most people it does seem best to wait until at least full retirement age to claim benefits. But since each situation is different, the main point is to estimate Social Security benefits as you approach age 65 and then make a plan based upon those figures.
Enroll in Medicare. You become eligible for Medicare when you turn 65, but you can begin the enrollment process as early as three months prior to your birthday. Those who have already claimed their Social Security benefits are automatically enrolled in Parts A and B, so they don’t need to do anything.
Otherwise, you will need to enroll at age 65, and decide whether you want Parts A and B or to enroll in a Medicare Advantage (Part C) plan instead. You might also wish to elect a Medigap plan or Part D (prescription) plan. Talk to an insurance professional about your options.
Consider long-term care insurance. About half of people turning 65 today will eventually need long-term nursing care. With the average cost hovering at $140,000, you might someday feel glad you purchased long-term care insurance. Consider it now, because premiums jump about 8 to 10 percent after you turn 65.
Look for property tax breaks. Some states and municipalities offer a property tax break for those over 65, but you usually have to file for it.
Meet with your financial advisor. It’s a good idea to meet with your financial advisor regularly, but especially as you approach retirement. Give us a call to schedule an appointment, and we can help you estimate Social Security benefits, make decisions about your budget, and answer any other questions you might have at this time.
As the COVID-19 pandemic stretches into its seventh month, leaders in Washington are debating a second stimulus bill. On August 8, President Trump signed executive orders that extended the federal unemployment benefit, but reduced the amount from $600 per week to $400. The orders also suspended the payroll tax through the end of the year, and suspended interest on federal student loans.1
However, even as President Trump signed the orders, Republicans and Democrats continued to negotiate terms for a second stimulus package. Democrats support a $3 trillion package known as the HEROES Act, while Republicans have their own $1 trillion HEALS Act.1
It’s unclear whether the final bill will include direct stimulus payments to Americans. Both Republicans and Democrats have endorsed the idea. However, it’s difficult to predict at this point what stimulus payments may be included in the final legislation.
Despite the uncertainty surrounding COVID, the election, and the overall economy, the financial markets continue to climb. After suffering deep losses earlier in the year, two of the three major market indexes are in positive territory. Through August 10, all index year-to-date returns are:
S&P 500: 3.53%2
While the markets have mostly recovered from their losses earlier in the year, volatility can strike at any time. That’s especially true should the COVID pandemic worsen or if the economy suffers continued damage. There also may be increasing uncertainty as the election approaches.
If you're concerned about risk, let’s talk about it. There are a wide range of strategies and tools we can implement to minimize risk and help protect your financial future. Let’s connect today and discuss your needs, goals and concerns. At Retirement Advisers.Net, we welcome the opportunity to help you implement the right strategy for your objectives.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20363 – 2020/8/20
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