Category: COVID-19

Market Update – March 27, 2020

The world continues its battle to contain the COVID-19 pandemic, which now has likely impacted, either directly or indirectly, nearly every person on Earth. This is far more than just a health crisis—this is a human crisis. Its fearful wake will only be bested by the bravery, perseverance, and hope of a determined world. It is more than just a dangerous illness, it is a test of our resolve.

Resolve requires more than just the courage to stare down the unknown—it is the commitment to overcome it. It all starts with the heroism of the first responders saving lives and scientists working tirelessly to find a cure. It shines on the truck drivers and market workers restocking empty store shelves. And resolve includes the sacrifices of small businesses and working Americans that are delaying the pursuit of economic growth for the temporary social-distancing practices that are helping to contain this pandemic. This unified resolve will be the ultimate cure for COVID-19, but its side effects are proving to be costly: slower economic growth over the short-term, a rise in unemployed Americans, and the resulting volatility we continue to see in the markets.

The unified and massive response of governments around the globe is encouraging. In coordinated action with central banks all over the world, our Federal Reserve (Fed) has already cut rates and announced open-ended asset purchases in a historically aggressive attempt to mitigate disruptions in financial markets and re-establish free flow of credit to consumers, businesses, and state and local governments. Fed Chair Jerome Powell stated that the US central bank stands ready to do “whatever it takes”—echoing the same words that European Central Bank President Mario Draghi said in the aftermath of the Great Recession to keep the Eurozone from unraveling. And, Congress is conducting its last negotiations on what will be at least a $1.5 trillion fiscal stimulus package to rescue struggling businesses and impacted Americans. These monetary and fiscal policy initiatives cannot fix the problem—only scientists and doctors can do that—but they can help “fix” the recovery, by helping to make sure that as many businesses as possible are strong enough to re-start their growth engines to aid the economy as soon as this global pandemic wanes.

Nobody knows when and where this will end. But we have confidence the recovery—for our nation, our economy, and the markets—is around the corner. We also know that the S&P 500 Index is 34% below its all-time high (as of the close March 23, 2020) from just over a month ago and is essentially pricing in the full extent of a recession (historical average is -37% in a recession). Though sell-offs are never encouraging, a bright spot is that this one resembles the severity of the market reactions during past severe pandemics. During the unusually deadly influenza outbreak of 1918, stocks dropped 33% before recovering; about 50 years later in 1969, a dangerous flu pandemic drove markets down 36%. Today, ironically another 50 years or so later, markets have declined a similar amount, which brings to mind the famous Mark Twain quote, “History doesn’t repeat itself, but it often rhymes.”

There are more negative storylines yet to be told in this pandemic as new cases continue to grow in the United States, concern remains elevated, and market volatility reigns. Every day, we are inundated with more and more cancellations—everything from shuttered workplaces to closed schools, cancelled graduations, and restricted public gatherings. But, optimism for the near-term future has not been cancelled. Neither has hope. And, neither has the long-term prosperity of America, our economy, and the prospects for long-term investors to possibly participate in an eventual market recovery. Our future is not cancelled—it has been ignited with our resolve.

 

 

Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of March 24, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Some Things Don’t Change

Some Things Don’t Change

A lot has changed in the last two weeks. Some things have not.

YOUR VALUES & GOALS

Before reacting to short-term or temporary emotions, consider seeking professional help from your plan’s financial advisor. A consultation can help ensure your financial actions are aligned with your Values & Goals.
Strategic Retirement Partners is here to help.
plantoday@srpretire.com · 866-SRP-401K x1

 

 

Market Update – March 20, 2020

Our everyday lives have changed dramatically over the last few weeks as we work together to minimize the impact of the COVID-19 pandemic. We know these efforts are necessary, but they also have come at a cost.

Global economic growth has been slowing, the US economy likely will contract temporarily, and US stocks have entered a bear market. Big stock market moves, both up and down, have become the norm. The yield on the 10-year US Treasury note has fallen to an all-time low, making borrowing cheaper—but challenging savers. In short, this has been a challenging period for many long-term investors, and you’re asking what’s next and what to do.

Despite elevated uncertainty, we’ve been encouraged by the actions of global central banks and governments to support their economies and stock markets through this challenging period. In the United States, the Federal Reserve (Fed) lowered its policy rate by a full percentage point, the first move that large since the savings and loan crisis, bringing the rate to a target range of 0–0.25%. The full impact of lower rates may have to wait until loan demand picks up, but other Fed actions may provide more immediate support to help financial markets continue to run smoothly, bolster short-term funding, and increase market liquidity.

At the same time, the US government already has passed several measures to support the economy, and it’s currently working on a major fiscal stimulus bill of at least $750 billion. Discussions are still taking place, but provisions possibly could include paid sick leave, expanded medical testing, unemployment insurance, direct financial support for consumers, and relief for some of the most heavily impacted industries.

It can be difficult to keep looking forward with so much uncertainty and so many unanswered questions right now. But for long-term investors, it’s also important to maintain a clear vision of financial goals and the plan for getting there.

Market volatility like we’re experiencing now may provide pockets of opportunity for suitable portfolios. As a recession increasingly is priced into markets, stock market valuations relative to their earnings power and to bond yields have become more attractive. Current uncertainty means taking a careful, measured approach, but for appropriate investors there may even be small ways to consider taking advantage of these potential opportunities.

It’s likely we may see an economic rebound later this year and into 2021 as the outbreak is contained, businesses reopen, and fiscal and monetary policy support expands. The US economy and corporate America have steered their way through world wars and cold wars, financial crises, and geopolitical events. Through even the most challenging times, markets have found their way back to normalcy, and investors have been able to look to the future. There’s no reason to believe this time will be different.

 

 

 

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of March 18, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Retirement Plan Questions During Tough Times

As we are navigating the evolving challenges that come with COVID-19, things are changing very quickly and companies are reacting to news of the public health crisis, changing work strategies including remote work and mandatory closures. Are you asking this question?

 

What can we do about our match and profit sharing if times get tough?

Employers may limit or stop making matching contributions to 401(k) retirement plans during hard times to save cash and sometimes avoid layoffs. Although such a cut is typically temporary, it can derail retirement goals for some employees. It can also create tough decisions for those individuals nearing retirement, such as whether to increase their contributions, reduce goals, or delay retirement.

  1. You must review your plan document to determine if your match is discretionary
  2. Stopping your match mid-year may trigger a true-up match contribution at the end of the year
  3. It requires employee notice
  4. It may create employee morale issues and increase employee uncertainty

 

We have a safe harbor match  or safe harbor non-elective contribution- can we stop this?

Yes, the IRS has changed that so that effective for the 2014 plan year, a mandatory nonelective safe harbor plan or mandatory safe harbor match plan can eliminate the contribution mid-year in two circumstances:

  1. The company is operating at a loss for the year.
  2. The safe harbor notice distributed before the beginning of the plan year indicates that the plan may be amended to remove the safe harbor contribution during the year. If the plan is amended during the year, at least 30 days’ advance notice is required during which time participants must be permitted to change their deferral election, the contribution must be made for compensation paid before the change and the plan must pass ADP/ACP testing for the entire year.

 

We may have to lay off some/many of our employees in light of the mandated changes caused by policies relating to COVID-19- is there anything we should think about with regard to the retirement plan?

Yes, a  plan may trigger a partial termination if more than 20% of your total plan participants were laid off in a particular year.

  1. Partial terminations can occur in connection with a significant corporate event such as a closing of a plant or a division, or as a result of general employee turnover due to adverse economic conditions or other reasons that are not within the employer’s control.
  2. The law requires all “affected employees” to be fully vested in their account balance as of the date of a full or partial plan termination. They must become 100% vested in all employer contributions (including matching contributions) regardless of the plan’s vesting schedule. Employee salary deferrals are always 100% vested.
  3. An affected employee in a partial termination is generally anyone who left employment for any reason during the plan year in which the partial termination occurred and who still has an account balance under the plan. Some plans wait until an employee has 5 consecutive 1-year breaks in service before he forfeits their nonvested account balance. For these plans, employees who left during the plan year of the partial termination and who have not had 5 consecutive 1-year breaks in service are affected employees. See IRC Section 411(d)(3) and Revenue Ruling 2007-43.

If you have specific questions as to what your  plan allows, please call us or your recordkeeper.  As always we are available to talk through any questions or concerns.

 

 

 

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services are offered through Global Retirement Partners, an SEC Registered Investment Advisor. Global Retirement Partners and Strategic Retirement Partners (SRP) are separate entities from LPL Financial.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Market Volatility – Plan Sponsor Webinar – March 19, 2020

Please join members of SRP’s Investment Committee to discuss the recent market volatility caused by COVID-19. Click here to watch the recording.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services are offered through Global Retirement Partners, an SEC Registered Investment Advisor. Global Retirement Partners and Strategic Retirement Partners (SRP) are separate entities from LPL Financial.

Global Retirement Partners employs (or contracts with) individuals who may be (1) registered representatives of LPL Financial and investment adviser representatives of Global Retirement Partners; or (2) solely investment adviser representatives of Global Retirement Partners. Although all personnel operate their businesses under the name Strategic Retirement Partners (SRP), they are each possibly subject to differing obligations and limitations and may be able to provide differing products or services.

Keep Calm and Carry On

Easier said than done in this environment, right? With the market down and COVID-19 alerts on high, emotions are soaring. Many investors want to act; this is a natural human response. There are indeed a couple proactive measures you may want to consider taking at this time, but they don’t necessarily include overhauling all of your retirement plan investments.

1. Examine your emergency (cash) savings.
It’s always important to have an emergency account (3-6+ months of living expenses readily available) but even more paramount during times of market and economic uncertainty. If it’s been awhile since you took pen to paper to calculate your short-term needs, now is the perfect time to do just that and prioritize funding any shortfall.

2. Reassess your long-term appetite for risk.
It’s easy to be an “aggressive” investor when the market is seeing double digit returns. Conversely, it’s quite popular to be “conservative” when the market is down. But these are circumstantial strategies. It’s important to reevaluate your long-term risk profile, regardless of market conditions, from time-to-time. There are many helpful risk questionnaires out there; we’re happy to provide one if you need it (email us at plantoday@srpretire.com).

3. Commit to your retirement savings plan.
You’ve heard us say it time and again, “stay the course.” It can feel passive but deciding to stay committed may be the most important action you take! Staying committed to a retirement plan (both contributions and investment strategy) during times of volatility can have positive long-term implications. Even including downturns, the S&P 500’s average annual return over all 10-year periods from 1937 to 2019 was 10.47%.*

4. Talk to a financial advisor.
Thinking of making a change? Talking with an advisor can be especially helpful for perspective if you’re considering a change. It is our goal to help all our retirement plan participants plot a strategy that will lead to a dignified and graceful retirement. It would be our privilege to speak with you about your plan, help alleviate concerns, or make adjustments if necessary. Please let us know how we can provide support.

5. Be safe!
This most certainly is March Madness of a different variety. As we navigate it as a nation, stay healthy, wash your hands, and help support those in need.

 

 

 

*Sources: Capital Group, Morningstar, Standard & Poor’s. As of 12/31/19.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services are offered through Global Retirement Partners, an SEC Registered Investment Advisor. Global Retirement Partners and Strategic Retirement Partners (SRP) are separate entities from LPL Financial.

Global Retirement Partners employs (or contracts with) individuals who may be (1) registered representatives of LPL Financial and investment adviser representatives of Global Retirement Partners; or (2) solely investment adviser representatives of Global Retirement Partners. Although all personnel operate their businesses under the name Strategic Retirement Partners (SRP), they are each possibly subject to differing obligations and limitations and may be able to provide differing products or services.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The S&P 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.

Market Update – March 13, 2020

Fears over the spread of COVID-19 (coronavirus) have gripped the country and sent stocks in the US and around the world into bear markets. Thursday’s nearly 10% decline in the S&P 500 Index was one of its worst days in history and the largest one-day percent decline since the 1987 crash. What makes pandemics so much more personal than other crises is how they are felt by everyone, as nearly all major events have been cancelled, major league sports seasons have been postponed, travel restrictions have been put in place, many employees are being sent home to work remotely, planes are empty, and many shoppers are staying away from stores and restaurants.

These significant efforts to contain the outbreak are also the same actions that will have an impact on the US economy. Just a few short weeks ago, the economic environment was healthy and improving in the US and around the world. Now, as we head into the second quarter, the presence of an economic slowdown is a reality and the odds of a recession are increasing. That said, in our view markets have largely, if not overly, priced in these recessionary outcomes.

We think some context here is important. Fear, as a core human emotion, is magnified when situations arise unexpectedly and quickly. In other words, it has been the speed and unexpectedness of recent events that has driven the outsized reaction from the markets. In fact, the S&P 500 Index needed only 16 days to go from a new all-time high to a bear market (measured as 20% off the recent highs), an all-time record, topping the previous record of 28 days in 1929. Many investors have never seen jarring moves like this before.

One potential positive from stocks falling into a bear market this quickly is historically they have also tended to stage more powerful rallies off the lows. For the bear markets since World War II that saw 20% or more declines within 270 days, the S&P 500 tended to bottom more quickly and recorded shallower declines. On average, these quicker bears averaged a 26% loss, compared with the average bear market decline of 33%. Given this was the quickest bear market ever, it is reasonable to think a strong reversal might be possible.

The great news is that the US economy was very healthy before this three-week stretch of steep market declines, with employment strong and the unemployment rate near 50-year lows, solid job and wage gains, corporate profits poised to accelerate, and company balance sheets in excellent shape. This bodes well for a faster recovery on the other side. Like someone who gets sick, the healthier you are coming into it, the faster tend to recover.

The investor playbook is always to follow your investment plan. The only thing worse than not having a plan is abandoning the one you have. The stock market has already suffered declines similar to those associated with mild recessions. That doesn’t mean stocks can’t go lower. It just means that the opportunity for long-term investors is getting more attractive. While markets continue to face a crisis of uncertainty, we still have unwavering confidence in the long-term fundamentals and prospects for the US economy and corporate America.

 

 

 

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of March 13, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Market Update – March 9, 2020

The tough times that global markets were experiencing due to the spread of COVID-19 (coronavirus) worsened this past weekend as a price war between Saudi Arabia and Russia resulted in sharply declining oil prices. This combination of events is testing investors’ patience.

We need to remember that it is fairly common for stocks to enter bear market territory, defined as a cumulative drop of 20% or more, without being in a recession. In fact, market drops are often more fueled by the fears of a recession, rather than a recession itself. While there are certainly concerns that are eroding investor confidence, we should not lose sight of potential positive catalysts and countervailing forces to an otherwise nervous market. First and foremost, when stock prices fall significantly, markets are not only pricing in bad news, but also providing an attractive entry point for long-term investors. Second, markets have built in “shock absorbers,” since short-term negative news can lead to longer-term positive outcomes. For example, lower oil prices will eventually result in lower gas costs and more money in the pockets of consumers.

One common market axiom is that “the first cut is the deepest,” which implies that when concerning news first breaks, like the first reports of the spread of COVID-19 or a major drop of oil prices, markets immediately react intensively, but each additional piece of news becomes less impactful. In other words, the news doesn’t have to be good to lift stocks—it just has to be less bad. To apply this to what we are currently experiencing, historically in pandemics, stocks have usually begun to recover as the number of new diagnosed cases stabilizes, not necessarily even declines.

In times like these, our natural inclination can be to sell. But we know this difficult environment—while scary for all of us—is temporary. History has taught us that rampant volatility creates opportunities—we experienced this in 2008, 2011, 2016, and most recently, in December 2018. When market prices disconnect from underlying fundamentals, invariably the best decision for long term investors has been to stay the course.

Though it can be difficult to focus on the long term at times like these, we believe this is one of those situations where eventually we will look back at it as a unique opportunity. Envisioning ourselves in that position in the future isn’t easy right now. It was hard to see green shoots in 2008, when few could envision the emergence of a positive market coming out of the financial crisis. Those who sell in a market storm rarely notice when the storm clouds begin to lift. And, as investors, missing those stock market rebounds is perhaps the biggest risk to achieving our long-term goals.

We don’t know exactly when this market will find a bottom and reverse course. Markets are facing a crisis of confidence. But, our confidence in the long-term fundamentals and prospects for the US economy and corporate America is unwavering. We will get through this. We believe that patience will be rewarded.

 

 

 

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of March 9, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Market Update – March 5, 2020

It’s been a tough week. The number of coronavirus cases have continued to increase globally, and new cases have been confirmed in the United States. Countries are making progress with containment, but those efforts also have resulted in a reduction in economic activity, adding to market uncertainty.

Understandably, people are nervous. It’s impossible to predict how many people will be affected or how containment efforts may impact the economy. Prospects for a pronounced economic slump and a wider outbreak have led many investors to sell first and ask questions later. Last week the S&P 500 Index suffered its worst weekly decline since the financial crisis in 2008, and the fastest 10% correction ever recorded from a record high. That’s a fast move from a high to a low.

Keep in mind that a little more than two weeks ago, stocks were at all-time highs, and the biggest worry for many investors was whether stock prices had come too far too fast. Volatility was almost non-existent from October 2019 through mid-February, and investor sentiment measured bullish. Since then volatility has spiked to some of its highest levels in years, with markets reflecting a heavy dose of fear.

The Federal Reserve’s (Fed) perspective on the evolving crisis has also changed quickly. Until last week, the Fed had been communicating that it expected to hold interest rates unchanged. Then on March 3, the Fed cut rates by one-half a percentage point (.5%). Anticipation of Fed action helped drive the market rally on March 2, and the rate action may help support the economy and stock prices through this near-term soft patch as efforts to contain the outbreak continue.

As you contemplate your next move, it’s important to keep the following in mind:

  • The U.S. economy and corporate America are resilient and adaptable. Stocks have weathered wars, natural disasters, terrorist attacks, financial crises, and many other economic and geopolitical shocks. Through it all, stocks have produced a 9% annualized return since 1929, as measured by the S&P 500 Index. (source: Bloomberg).
  • Like crises in the past, this one will pass. It’s difficult to see the other side of this right now, and economic disruption may be significant, but the economic impact may be temporary. Markets appear poised to eventually look forward to better days, based on economic fundamentals.
  • Now may be a good time for suitable investors to consider adding equity positions to their portfolios, where appropriate. We find that the best sell decisions often come when investors struggle to find reasons to sell. The best buying decisions often can be the most uncomfortable.

If you’re concerned the outbreak may get much worse before it gets better, you may want to think about revisiting your long-term investing strategy. Although it’s not a current expectation, a potential U.S. recession or a bear market cannot be ruled out. For most long-term investors, however, the best move may be no move.

 

 

 

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of March 3, 2020.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.