First VP Debate 2020
From last week’s SAS newsletter highlighting the Presidential candidate debates, economic predictive analysis, and mortgage updates, to this week’s SAS newsletter highlighting the Vice Presidential candidate debates, you won’t want to miss it below!
Reminder
Tax Filing Due Date with Filed Extension Approaching: 10/15/2020
Quick reminder that if you filed an extension for your personal tax return, the due date with extension is approaching on October 15th, 2020.
VP Debates
We need a quiet week for our sanity yet still no slowdown of the news-cycle in sight. President Trump tested positive for Covid-19 and the White House and Washington DC newer surge hot spots. President Trump was hospitalized for the weekend and the degree of uncertainty about his health had markets sell off briefly. Markets rallied back on the anticipation of a new fiscal stimulus that was dashed before the close on Tuesday with Trump withdrawing from talks saying he will wait until after he wins the election! That was before he changed his mind and gave markets hope for a stimulus before the election.
Vice presidential debates took place last night with plexiglass shields present-a definite sign of the times. President Trump’s diagnosis adds more uncertainty over whether the second presidential debate between Trump and Biden will occur next week. Will the debate be held from remote locations? Happen at all? Time will tell. This all unfolds while many voters have begun casting their votes early. Many voters receiving their vote by mail ballots this week were surprised to see Kanye listed on the ballot, though in 2020 I don’t know what surprises us anymore.
Economy
Fiscal stimulus will help those Americans on the bottom leg of the K-shaped recovery we seem to be experiencing. 2nd quarter GDP growth rate was down over 30%. 3rd quarter ending September 30 growth estimates range up to growth of 30%. Quite a recovery in economic activity. However, job losses were about 30 million in March and we have regained about 10 million of those jobs leaving about 20 million unemployed and a slowing rate of job increases over the past 3 months. Any estimates for 4th quarter growth have to make an assumption about further fiscal stimulus. With no stimulus any estimate would be severely cut. Given the uncertainty however, markets do not seem to be concerned at least on the surface. The volatility index or VIX remains elevated so professionals and the options market are reflecting concern.
Markets
The yield curve for interest rates is steepening marginally with the 30 year US Treasury yields rising from 1.45% to 1.6% this month so far. Interest rates are still historically low. CA municipal bond yields still provide higher returns than the equivalent US Treasury maturity so we continue to purchase CA tax free municipals. Preferred stock and closed end funds that purchase preferred stock have been our favorite source of income for clients; they offer competitive yields and the majority of distributions are qualified dividends taxed at a preferential rate. The much higher yields of both preferred stock and closed end funds offset the low yields of bonds. Despite currently low yields, bonds are still meaningful in the allocation. Low yields do not take away from the stability bonds add to the portfolio since they help balance against stock market volatility swings, especially those we have seen throughout 2020.
Next Generation of Investors
In our practice we regularly offer clients with college age or adult children approaching graduation and beginning their full-time careers an opportunity to talk with us about financial planning decisions awaiting them. This includes investment education, cash flow organization, credit/debt management, career planning with fine tuning to shape the right fit for their interests and skill sets, interviewing and salary negotiation tips, organizing household finances and more. So far this has been organic, meaning clients with young adult children have asked us for advice.
Elizabeth and Monique have more recently been through this life stage and have established wonderful connections with this new generation of savers and investors. SAS has established many existing multi-generational financial planning relationships with parents, grandparents and grandchildren. Let us know if you are interested in these conversations.
Self-care
Despite all the challenges facing us, we each need to find time for a break. Some clients are finding a safe place to take a mini vacation. Since children are attending school remotely you can get away from home during a time that has been traditionally “offseason”. Find time to take deep breaths. Remember to stay hydrated, get regular exercise, and take time to breath.
