thoughts as we finish out this 3rd Week of October 2020
Hard times come again no more. But if you must come, surround me with people who care.
U.S. stocks continued this week’s struggle for direction as uncertainties loom large over the market. We have an election in 11 days; Covid-19 cases are on the rise again, and fiscal stimulus negotiations have stalled. We have not had a clear direction in the market since August and all we CAN count on is volatility. These three fronts are converging, and the makings of a perfect storm are forming, but at least, the good news is that in 11-100 days, we will know who is going to be President. Finishing out this trifecta of worry is a deceleration in economic activity that is exacerbated by the failed fiscal stimulus negotiations in Washington. ☹ Why does this matter to you? I think it helps to just accept that sometimes we are in a very tough place, and that the only way out, is through it. It will take time for us to work our way out, but curiously, during this time I have been able to completely re-design Skye Advisors. And, while we wait for this time to pass, your portfolio reflects these threats as we both understand that patience IS a virtue here.
The Coronavirus Aid, Relief, and Economic Security Act, otherwise known as the CARES Act, was supposed to be a $2.2 trillion support for our economy while we shut down all non-essential services and sheltered in place to contain the spread of COVID. Unfortunately, that money was wasted to a large degree because we were not uniformly disciplined in practicing social distancing, reducing crowd size, and wearing face coverings. Now we are basically back at square one and are faced with needing another $2 trillion to support the economy, hoping we will be more successful in containment this time. 😲Why does this matter to you? If the daily case count continues to rise and our healthcare system is once again overwhelmed, as it was earlier this year, it will not matter if our economy is reopened or not. Consumers will cut back on spending at service-oriented businesses where social distancing is difficult to maintain. More businesses will close, and jobs will be lost, resulting in even more spending retrenchment. It is essential we have a more targeted fiscal stimulus as we work to find therapeutics and a vaccine. There is no other way.
Fed Governor Brainard joined the chorus of Fed governors expressing support for additional stimulus: continued targeted support to replace lost incomes will be an important factor in determining the strength of the recovery. Apart from the course of the virus itself, the most significant downside risk to my outlook would be if we do not step up to this moment…if there is a failure of additional fiscal support to materialize. 😊Why does this matter to you? While it seems we will never get past this difficult, unprecedented time, please know that there are many strong hands at the helm, and I believe smart heads will prevail.
The 2017 SECURE Act eliminated the stretch IRA for most non-spouse beneficiaries…for when we pass our retirement accounts to our kids. This became effective beginning with deaths in 2020, so it is imperative for us to review your beneficiary designations of all retirement accounts…IRAs, ROTH IRAs and 401Ks. Now, our kids (and other non-spouse beneficiaries) will no longer be able to draw out inherited IRAs for over their lifetimes…they will be have a new 10-year payout rule. This means that the entire inherited IRA will have to be withdrawn by the end of the 10th year after the IRA holder dies. 😲 Why does this matter to you? One of the ways you can better manage your income tax liability over the coming years…as well has help your kids keep more of your retirement, is by working to shift as much as we can, out of retirement accounts, over the next few years while tax rates are the lowest they have been in decades. This is one of the “grimmest” planning tasks I have, but it is my job to be as rational, and smart, with every dollar you have today…and into the future. Know that I will talk about taxes present and future every time we meet.
I spent 4 days last week at my annual XY Planning Network advisor conference: the last 2 years it has been in St. Louis but this year, it was here in my home office! This conference lets advisors connect with some of the smartest, most innovative minds in financial planning today. I joined this network shortly after I launched Skye Advisors and while you might not know these names or faces, the co-founders Michael Kitces and Alan Moore are two of the best allies’ clients will ever have. Once again they shared the ways they are working, for both you and me: it is rare to have such unique, forward thinking, ethical and creative minds in an industry like finance.
😊 Why does this matter to you? In what’s become an annual tradition, Michael and Alan seated themselves (virtually) before us, and took any question ranging from new business offerings to how the organization is negotiating agreements with vendors, to the impact of the pandemic on our industry. Based in Boseman Idaho, I count on XYPN to keep bringing you solutions to solve financial problems you might not even know you had.
The power of partnership is more important during times where extreme change is happening. We have got lots to do over the coming months as Skye 2.0 rolls out.
Constancy noun con·stan·cy | \ ˈkän(t)-stən(t)-sē