Investors Take Stalled Stimulus in Stride

Please note: This update was prepared on Friday, October 23, 2020, before the market’s close.

StockA financial instrument giving the holder a proportion of the ownership and earnings of a company. markets were mostly muted this week, with Wall Street adopting a wait-and-see stance in the waning days of the presidential campaign. The latest breadcrumbs from pandemic-relief negotiations continue to drive investor sentiment—yet for all of the uncertainty surrounding the stimulus and elections, the S&P 500 index is up 2.7% for the month through Thursday.

If the stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. markets appear as though they’ve stagnated of late, well, they have to some extent. Day-to-day volatilityA measure of how large the changes in an asset’s price are. The more volatile an asset, the more likely that its price will experience sharp rises and steep drops over time. The more volatile an asset is, the riskier it is to invest in. has decreased, surprising many, including us, who thought market action would pick up as Election Day neared. Indeed, compared to September, we’ve seen about half as many days in October when stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. ended more than 1% higher or lower.

But the market calm may not last. A contested election could spur volatility and rising COVID infections—Thursday marked the third-largest single-day count for new cases—could bring additional virus-related disruptions as flu season begins. Yet, as we’ve seen, certain companies and segments of the economy have been better able to adapt to this year’s changing landscape—a fact that our strategies and models have been working to capitalize on.

Through Thursday, the Dow Jones Industrial Average has returned 1.2% for the year, while the broader S&P 500, mainly riding on the back of a handful of mega-sized technology companies, is up 8.5%. The MSCI EAFE index, a measure of developed international stock markets, is down 6.1% for the year. As of Thursday, the Bloomberg Barclays U.S. Aggregate BondA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. index’s yieldYield is a measure of the income on an investment in relation to the price. There are several ways to measure yield. The current yield of a security is the income over the past year (either dividends or coupon payments) divided by the current price. stood at 1.24%, down from 2.31% at the end of 2019. On a total return basis, the U.S. bondA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. market has gained 6.3% this year.

Housing Market Rallies On

The housing market is one area of the economy where we’ve seen a true V-shaped recovery. Sales of existing homes rose for the fourth consecutive month in September, and are now running at a pace unseen since mid-2006. Ultra-low mortgage rates and a COVID-19 environment is part of what’s pushing people from pricey urban areas to (in some cases) the more affordable and spacious suburbs.

Prices are rising and builders have taken notice. Homebuilder confidence reached a 35-year peak in October, and both new construction and building permits (a bellwether for future home construction) are on the rise.

And let’s not forget the knock-on effect: moving from the city to the suburbs usually means people have a lot more house to fill. That ushers in additional spending on the appliances and furnishing required to turn a house into a home.

Curtailed Travel Leaves Consumers Ready to Spend

What’s one upside to the COVID-19-related travel restrictions? Many households are sitting on extra spending money as we head into holiday-shopping season. Surveys show that one in five people who typically travel during the holidays are planning to stay put this year—and more than half say they’ll use funds originally earmarked for airfare and gas to buy gifts and holiday items such as festive food and decorations.

Surveys aside, we always pay more attention to what consumers actually do with their hard-earned dollars rather than what they say they will do. And so far there’s little concrete data to either support or refute the surveys.

But one thing seems certain: Online shopping will set records this holiday season. And even purchases made in-person are likely to start online as retailers adapt to serve customers whose preferences and comfort level with virus-exposure riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. have changed.

As we near the year’s end, we think the election, the pandemic and the state of the job market will dictate whether it will be a season of joy (however muted) or one of sorrow. We are optimistically forecasting the former while our strategies are prepared to react to either development.

Podcast: All About Roth IRAs

The tax advantages associated with Roth IRAs are well-known. But should contributing to one be part of your financial plan? In this episode of The Adviser You Can Talk To Podcast, our financial planning specialists Andrew Busa and Rick Winters provide an in-depth explanation of the uses and benefits of the Roth IRAA type of account in which funds can be saved and invested without being subject to tax until the account holder reaches retirement age., including:

• The requirements and tax advantages
• Why to open a Roth early in your career
• The so-called “backdoor” Roth conversion—what it is and when to do it
• The Roth’s role in your legacy planning

Curious about whether converting from a traditional IRA to a Roth is right for you? Listen now to learn how you can deploy Roth IRAs for maximum benefit! Click here to listen now.

Or, click here for our free special report, Converting to a Roth IRA.

Financial Planning Focus

Social Security’s Family Benefits

You don’t have to be retired to receive Social Security. You read that right. In certain cases qualified family members and dependents can receive benefits. Let’s look at some of those cases and consider how they may factor into your financial plan.

Benefits for Spouses

If you are (or were) married, you may be eligible to receive up to 50% of what your spouse receives in Social Security. This option does not reduce or change what your spouse receives. Instead, it can maximize your own benefit if your spouse was the primary breadwinner while you spent some or all of your working years raising children or otherwise outside the workforce. Depending on your work history, applying for spousal benefits may make more financial sense than filing for Social Security individually.

Spousal benefits start upon your spouse’s full retirement age (FRA)—66 or 67 depending on their year of birth. As with regular benefits, spousal benefits will be reduced by 8% each year if you file early. However, unlike traditional benefits, the spousal version will never grow beyond 50% of the primary breadwinner’s FRA payment, even if you wait until age 70 to file.

Benefits for Children

If you become eligible for Social Security benefits while you still have minor children, they may be entitled to receive benefits of their own when you file. To receive these benefits, the child must have a parent who’s disabled or retired and entitled to Social Security; or a parent who died after having worked long enough in a job where they paid Social Security taxes. In addition, the child must be either:

• Under age 18
• Under age 19 and a full-time elementary or high school student
• Age 18 or older and have a disability that began before age 22

These are potentially significant benefits. We advise you to consider taking full advantage of them if your children are eligible.

Benefits for Survivors

If your spouse passes away you may be entitled to receive their Social Security benefit upon full retirement age, assuming the benefit exceeds what you would claim based on your own work history. A widow or widower is eligible for survivor benefits as long as the couple was married for at least nine months at the time of their spouse’s death. If the surviving spouse is already receiving the spousal benefits mentioned above, they will automatically switch to survivor benefits once the Social Security Administration is notified of the death.

One important note: If the partner passes away and the widow or widower remarries before age 60, they are not eligible to receive survivor benefits based on their first spouse’s income.

Social Security eligibility varies based on your circumstance. If you have questions about your specific situation, please contact us to receive personalized advice. We’re happy to help. Or for more about Social Security, please read our special report, Social Security’s Role in Your Retirement, or listen to our “When Should You File for Social Security?” podcast.

Adviser Investments’ Market Takeaways

Calm and clarity have been sorely lacking when it comes to market news recently—that’s why we’ve begun providing Today’s Market Takeaways, short videos in which a member of our investment team analyzes what the market’s telling us.

You can find two new Market Takeaways videos on our website. Research Analyst Liz Laprade looked at how the pandemic has impacted the real estate sector and Vice President Steve Johnson discussed the case for economic optimism going into next year.

Looking Ahead

Next week brings data on personal income, spending and savings as well as consumer confidence and sentiment. We’ll also get the first estimate of third-quarter economic growth (GDP) and September reads on inflation and durable goods.

As always, you can visit www.adviserinvestments.com for our timely and ongoing investment commentary. In the meantime, all of us at Adviser Investments wish you a safe, sound and prosperous investment future.

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.