thoughts as we finish out this 4th Week of August 2020
Consumer confidence fell in August to a new pandemic low after a fresh rash of coronavirus cases caused more pessimism about an economic recovery. The index of consumer confidence sank to 84.8 this month, from 91.7 in July. It also seems we are just as pessimistic about the near future as another gauge that assesses how Americans view the next six months -- the so-called future expectations index -- dropped from 88.9 to 85.2, a new pandemic low. The rollercoaster rides the economy has been on have settled into a more gradual pace of recovery as more people are venturing out to eat, exercise in health clubs and return to movie theaters that have started to reopen. Yet, the persistence of the coronavirus, the reduction of temporary federal benefits and depression-level unemployment are likely to stall the economy for the rest of 2020. ☹ Why does this matter to you? I try to have as few “downs and frowns” as possible but it is so important that we don’t get “shelter fatigue” and take risks we later regret. Remember, the polio pandemic took the decade of the 1950s to find a vaccine, complete the trials, produce it, and get it out to our kids. I remember being told not to play in the rainwater in storm gutters due to fears of getting polio. The first Polio Epidemic hit the U.S. in 1894 and the history is fascinating…read more here https://www.historyofvaccines.org/timeline/polio
This Headline: “Less risk, more performance” sounds like a spin on the Miller Lite slogan from years past about tastes-great-but-less-filling. While Skye Advisors’ clients have been investing this way for years, mainstream investment firms are now taking notice. The simple fact, seen in many fund’s 2020 performance, is that how you invest…matters: never was “profit at any cost” more out of step than in this pandemic. Companies are looking at environmental / social / governance factors --“ESG” as you can feel good while you do good. The popularity of sustainable investing has been rising quickly among institutional investors and you can divide the space into two types of socially responsible investing: ESG focuses on how a company operates…while Impact Investing focusses on how the company can change the world it operates in, but making money is the goal for both! 😊 Why does this matter to you? Every time you see “ESG” in my logo you know sustainability is the heart of Skye Advisors: together, we are part of the solution.
WOW!!! 1,000 of the Dow Jones Industrial’s point gain this summer is due to the rise in Apple. With the stock splitting today, Apple is the darling of the market and the reality is that it could continue higher for some time. Now valued at 37 times earnings…Apple is up 35% since the announcement of the split a month ago. So, when will Apple will fall back to earth? No one knows, but we have seen this story before. 😊Why does this matter to you? You own a slice of Apple as fund managers who do not want to be left out of the party are holding their nose and buying it. Professional management will help you avoid the downside.
As governments around the world continue to grapple with the impacts of COVID-19 and the resources it demands, organizations are sounding the alarm regarding a major secondary impact of the pandemic: plastic waste. There has been an exponential surge in plastic consumption coupled with an increased willingness on the part of governments to suspend or reverse restrictions on single-use plastic. Non-governmental organizations and community groups worldwide have reported that disposable plastic masks and gloves are washing up on beaches and impacting marine life. ☹ Why does this matter to you? Years of positive change and progress can be undone in a matter of months: it is even more important that each of us helps reduce this growing mountain of plastic. First, by not buying single use plastic. Second, by disposing of it in a way that is best for each type of plastic.
The toll that Covid-19 is inflicting on municipal finance is worse than we have seen in past financial crises. It’s worse because the revenue shortfall is uncertain and horrific: there’s an enormous loss of revenue going on, and we don’t know how long it will last. Even as city and state governments reel, investors are clamoring for their bonds…for cash flow. Yields are now at their lowest levels since the 1950s and at the same time, it seems nothing can stop this stock market rally. July saw the biggest bond issuance in 34 years -- and investors snatched them up. When Congress adjourned for its summer recess on Aug. 13 without sending more aid to cities and states, the market just shrugged it off. Yields are now a puny 0.7% for top-rated 10-year tax free municipal bonds but the yields being paid may not be enough to compensate investors for the risks that those “horrific” budget holes are predicted to dig. With businesses closing and so many people either out of work or underemployed, revenues from sales and income taxes are way off. Ditto for gasoline taxes, tolls for bridges and tunnels, public transit fares, and airport fees. In all, states are facing a budget shortfall of $555 billion through June of 2022 with cities and towns facing a $360 billion shortfall through December of 2022: a total approaching $1 trillion. The muni market on the whole has always been a relatively safe port in the world of bonds: since 1900, only one state has defaulted, Arkansas, in 1933. States, by law, cannot run a deficit or go into bankruptcy, but munis clearly are not the safe havens they used to be. The longer this crisis goes on without additional federal aid for states and local governments, the more stock market volatility there will be. 😲 Why does this matter to you? This is going to be one of the most challenging times income investors have faced: the days of 5% dividends are gone for a while.
Please stay safe and know that we will get through this together. Questions or want to talk? Book time on my calendar: https://calendly.com/skyeadv/ask-julie-about
Best Always, Julie
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