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Here’s what you need to know from last week. Markets Remain Strong S&P 500 recorded its sixth positive week out of the past seven, but it's gain was small, and it underperformed the Dow for the second week in a row. The NASDAQ rose slightly, eclipsing its record high set the previous week. The S&P 500 on Wednesday closed within a tenth of a percentage point of its record high set six months earlier, but the index couldn’t quite climb above its prior peak of 3,386 points. At Friday's close, it remained about 0.4% below the record. Economy Healing U.S. retail sales rose 1.2% in July, marking the third consecutive monthly gain, as shopping surpassed pre pandemic levels. In the labor market, 963,000 unemployment claims were filed in the latest weekly count, ending a string of 20 consecutive weeks in which claims topped 1 million. Gridlock Prevails Democratic congressional leaders and the Trump administration concluded negotiations without agreement on an additional pandemic relief package. They rejected overtures to return to the table, and both the House and the Senate were scheduled to be out of session through the rest of August. As the week ended, U.S. and Chinese officials opened a new round of trade talks in the wake of rising tensions that have put investors on edge. Election Season Could Present Opportunities The election season is officially underway with Biden choosing a running mate. Market predictions will flow regularly on TV between now and the election with people saying the markets will soar or crash depending on the results. The truth is the presidential election has very little impact on the long-term growth of the stock market. For example, the market was up 27% during the Carter administration. Markets will likely experience volatility over the next two months, drops in the market should be considered buying opportunities not reasons to sell. We often hear that we live in unprecedented times but many of the issues we fret over today are not new. These issues just lay dormant for a period and resurface. To illustrate I picked 5 Time Magazine covers that reflect issues we face today (president v press, capitalism v socialism, rising medical costs, police practices, and the US Postal Service in crisis). All of the covers you will see below are at least 40 years old.
I am here to help at any time. If you would like to schedule a phone/web conference appointment, click here for Stephen Caruso's calendar. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment.
The S&P 500 recorded its fifth positive week out of the past six, moving within 1% of its record high set less than six months ago, and the NASDAQ surpassed its record set in the previous week topping the 11,000-point threshold for the first time on Thursday. The nation’s wounded labor market continues to heal, albeit at a slower pace than in the late spring and early summer. The government reported the economy added 1.8 million jobs in July.
Washington Gridlock Stocks’ weekly gains came despite a rise in anxiety over the lack of conclusive progress toward an additional congressional package targeting the coronavirus and its economic impact. Talks between White House officials and Democratic leaders ended without a breakthrough prompting the President to issue an executive order on Saturday. if t order withstands the legal challenge it most certainly will receive then the unemployed will receive an additional payment $300/week of Federal funds through the end of the year. He also ordered a payroll tax holiday which means no deduction for Social Security and Medicare Tax. What Does A Payroll Tax Holiday Do? The 4 month tax holiday will defer collections of payroll tax. It has a positive short term effect for many. If you make less than $104,000 per year, your paychecks will probably be a little bigger for the rest of 2020. What it really does is improve the liquidity of struggling business and helps keep them solvent. It is not a great fiscal stimulus but is an effective way to keep more businesses open until we get through the pandemic, with the hope that when we do those businesses start making money and hiring again. Will Social Security Last Through My Retirement? A potential payroll tax holiday brings up the question of Social Security's future solvency. Understanding the facts are critical. No doubt, Social Security faces funding challenges, but not immediately and not bankruptcy. Benefits are paid through payroll taxes collected from current workers and their employers, and the program currently operates with a surplus of about $2.9 trillion. The tax holiday will reduce the surplus and with a rising percentage of retirees to workers that surplus will be gone soon enough. The latest projection has the combined Social Security trust funds that pay retirement and disability benefits running out of cash reserves by 2034. A fact they make you aware of on your Social Security statement. Running out of cash reserves does NOT leave Social Security bankrupt and unable to pay any benefits. Even if Congress does nothing to shore up the system by 2034, Social Security will be able to pay out 79 percent of promised benefits until 2090. The last time Social Security nearly depleted its reserves was in the early 1980s, when Congress shored up the program by gradually increasing the full retirement age from 65 to 67 and started to tax benefits based on income levels. The takeaway is Social Security in not going away. Changes will be made eventually but they are unlikely to impact those currently eligible to receive benefits.. Stephen Caruso is here to help at any time. If you would like to schedule a phone/web conference appointment, he has included a link to my calendar, click here. For those of you who prefer an in person meeting, financial advisor Stephen Caruso is now scheduling in person meetings as well, please email him if you would prefer an in person appointment. This was an important week for the markets, with key economic data released and four of the five biggest companies in the S&P announcing earnings. Stocks finished higher this week as the S&P 500 is now positive on the year following the biggest four-month gain in the S&P 500 since 2009. With baseball season starting back up, I have chosen to break down this week’s market news using quotes from Baseball themed movies and shows.  There’s No Crying in Baseball – A League of Their Own Market shrugged off terrible news without so much as a tear. GDP growth data was released, showing the sharpest quarterly downturn on record, driven by shutdown policies aimed at combating the spread of the coronavirus. The negative GDP growth, however, was better than expected. On the earnings front, half of the S&P 500 companies have now reported earnings with 84% thus far topping expectations. Big tech held the earnings spotlight, with three big tech names (Facebook, Amazon, and Apple) reporting results that were significantly better than expected.  You're Killing Me, Smalls - The Sandlot Congress devolved into partisan bickering causing negotiations over a fifth coronavirus relief bill to stall. The Fed calmed markets by again acting as the grown up in the room leaving no doubt that they will make good on their "whatever it takes" promise to support the economic recovery. Federal Reserve officials acknowledged that the path of the virus is the most central driver of the economy and activity is well below pre-pandemic levels. As a result, they will continue to hold interest rates near zero and maintain their bond purchases at least at the current pace.  You didn't come into this life just to sit around on a dugout bench, did ya? – Bad News Bears Sitting on the bench in bonds is not the right call. At current interest rates it will take you 140 years to double your money in bonds. Now is the time if you haven’t already to reduce or even eliminate bonds from your portfolio. Nervousness about the negotiations over the next round of fiscal relief, along with concerns about the sustainability of the rebound, pushed the 10-year yield to its third-lowest closing level (0.54%) on record and the five-year yield to a new record low. Rates may stay around these levels until we get through the pandemic and right now there are far more attractive income oriented investments than bonds.  Sometimes when you bring the thunder you get lost in the storm -Eastbound and Down
The speed and power of this 4-month market rally should have you feeling good about your investments. We escaped the bulk of earnings season, the Federal Reserve's (Fed) policy meeting, and the release of the economic figures from the shutdown unscathed, finishing the week up for the year. Economic data in May and June improved at a fast pace, which reflects the transition from recession to reopening. Housing appears to be on solid footing driven by a jump in the U.S. homeownership rate and record low interest rates. The good news is that this historic decline (more than twice the magnitude of the 2008-2009 contraction) seems to now be in the rearview mirror. Or is it? Better check your sideview as “objects in the mirror are closer than they appear”. The recovery seems to be losing some momentum in July, as coronavirus cases are rising in different parts of the U.S. with Dr. Deborah Birx this morning saying the virus is more widespread than when it first took hold in the US earlier this year. Reopening measures are being rolled back and timely, high-frequency data like credit card spending, restaurant reservations and trips taken show that the resurgence of the virus is having an impact on consumer confidence and spending. The labor market, a critical element for a sustained recovery, appears to be stalling. The number of U.S. workers applying for jobless benefits increased for the second week in a row and enhanced unemployment benefits which was helping prop up spending expired Friday. What does it mean for you? I don't think the market will be as volatile as some are forecasting so continue holding your existing stock positions. To the extent you have money on the sidelines waiting to deploy it is the prudent choice. A better opportunity will likely present itself in the next month or two, when it does add to the growth names that have led the market higher like Apple, Microsoft and Amazon. My name is Stephen Caruso and I am a Financial Advisor who is here to help at any time. If you would like to schedule a phone/web conference appointment, I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment. https://booknow.appointment-plus.com/b8hh5y90/ |
Stephen Caruso
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STEPHEN CARUSO
President & Founder
Laurel Wealth Solutions
President & Founder
Laurel Wealth Solutions
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Licensed Insurance Professional.
Stephen Caruso is an Investment Advisor Representative offering investment advisory services through Belpointe Asset Management, LLC, 125 Greenwich Avenue, Greenwich, CT 06830 (“Belpointe"). Belpointe is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe Asset Management offers, or that or its personnel possess a particular level of skill, expertise or training. Insurance products are offered through Belpointe Insurance, LLC. Important disclosures related to Belpointe are available at http://www.belpointe.com. Additional information pertaining to Belpointe’s registration status, its business operations, services and fees and its current written disclosure statement is available on the SEC’s Investment Adviser public website at https://www.adviserinfo.sec.gov/.
AR-4241 | 18296-2018/12/11
Stephen Caruso is an Investment Advisor Representative offering investment advisory services through Belpointe Asset Management, LLC, 125 Greenwich Avenue, Greenwich, CT 06830 (“Belpointe"). Belpointe is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe Asset Management offers, or that or its personnel possess a particular level of skill, expertise or training. Insurance products are offered through Belpointe Insurance, LLC. Important disclosures related to Belpointe are available at http://www.belpointe.com. Additional information pertaining to Belpointe’s registration status, its business operations, services and fees and its current written disclosure statement is available on the SEC’s Investment Adviser public website at https://www.adviserinfo.sec.gov/.
AR-4241 | 18296-2018/12/11