Home chevron_right Guides & Resources chevron_right Weekly Update Hopeful Signs Not a Cure-All June 1, 2020 Table of Contents Erring on the Side of Caution It's Not All Virus News FPF: 529s & Education Planning Adviser Investments’ Market Takeaways Looking Ahead Please note: This update was prepared on Friday, May 29, 2020, before the market’s close. Vaccine hopes and states reopening helped buoy Wall Street in the first half of this holiday-shortened week. But geopolitics got in the way as the week ended. StocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. dropped on concerns that China’s move to exert more control over Hong Kong would increase tension with the U.S. and other trading partners. Despite following up on April’s extreme bullishness with gains ranging from 4% to 7% for a host of U.S. stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. indexes, the markets remain anywhere from 5% to 15% below the highs hit in mid-February. On a more positive note, the S&P 500 index, for one, is up 35% from its March low. Through Thursday, the Dow Jones Industrial Average and the broader S&P 500 index were down 10.4% and 5.4% for the year, respectively, continuing to build off of the markets’ March lows. The MSCI EAFE index, a measure of developed international stock markets, is down 13.4%. As of Thursday, the 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. on 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 was 1.40%, down from 2.31% at year end. 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 5.1% for the year. Erring on the Side of Caution Memorial Day scenes ranged from fully masked social distancers to elbow-room-only sunbathers flocking to reopened beaches. Both images project a growing sense that the pandemic’s worst times may be behind us rather than ahead. We’re not so sure. Don’t get us wrong—we are seeing preliminary signs of our economy turning from the worst of times to times that are slightly less bad. Our overarching concern is that the markets have priced in a swifter, more robust economic rebound than is currently warranted. Knowing how difficult it is to change the narrative and people’s behavior around combating the virus, we’re skeptical the economy will see the smooth and steady return to normal we are all hoping for. While we still think that the intermediate-term prospects for the economy should be measured against medical data—specifically, control of the pandemic outbreak and development of a vaccine that can be deployed in volume worldwide—Wall Street traders seem satisfied by increased restaurant reservations in reopened states in the South and a pickup in air travel. We’ll stick to our more disciplined, risk-aware approach and wait for further evidence signaling a solid path toward growth. It’s Not All Virus News For the past three months or so, COVID-19 has dominated our collective attention and airwaves. And it’s still eating up a lot of bandwidth. But the longer it goes on, the less it becomes “news” and the more it becomes part of life. This creates room for other factors to begin to enter the frame. For example, tensions between the U.S. and China are coming to the fore, and it goes beyond just finger-pointing over the source of the coronavirus. China’s move to exert more control over Hong Kong has largely been condemned by the global community. Depending on how President Trump responds, the trade war between the U.S. and China, which was cooling down, could return to a boil. In a normal election year, we’d be inundated with campaign rhetoric and spin. The virus put campaigns on hold, but it’s starting to ramp up. As Joe Biden begins to revive his campaign, President Trump and executives at his preferred communication platform, Twitter, have been feuding. Expect election volume to turn way up in the months ahead with concomitant short-term impacts on investment markets. ***** Financial Planning Focus: 529 Accounts & Education Planning Since it’s May 29, we thought we’d take the opportunity to discuss some of the benefits of 529 accounts (5/29, get it?). While colleges and universities ponder how, when and whether campuses will reopen in the fall, the one thing you can be sure of is that tuition discounts may be slow in coming, as institutes of learning are still trying to balance their costs with what residential students are willing to pay for an online learning experience if campuses remain closed this fall. Here’s a quick overview on how you can better manage one of the smartest investments you can ever make: The Basics: 529 plans are tax-advantaged accounts designed specifically for investors to save for tuition and expenses related to private K-12 and higher education. Anyone can open a 529 account for a designated beneficiary, and anyone is free to contribute to the plan once it’s open. Plans are state-sponsored, generally in partnership with a mutual fund company or institute of higher learning. However, you generally aren’t limited to selecting a school in the state your 529 is sponsored by. Choosing a Plan: You have several key considerations in selecting a plan. First, evaluate the investment options available to you, as they are not uniform state-to-state. Second, you may be able to get a deduction on your contributions if you elect to use your home state’s plan, so be sure to explore that option if it’s available to you. (Read our exclusive special report for more details.) Plus, like other investment choices, fees vary. Tax Benefits: Think of 529s like a 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., only for education savings rather than retirement. Contributions to the account are made with after-tax dollars, and growth of investments therein are tax-free. Plus, any withdrawals you make to pay for qualified education expenses are also untaxed. Withdrawals used to pay for expenses that aren’t qualified are subject to a stiff penalty, however—you will need to pay ordinary income tax plus a 10% penalty on any non-qualified plan withdrawal. Special Considerations: 529s also work well as wealth-transfer and estate-planning vehicles. You can make a one-time contribution of up to $75,000 ($150,000 if married, filing jointly) for as many beneficiaries as you like and choose to treat the deposits as if they were made over a five-year period for gift-tax purposes. The benefit is two-fold: Move a big chunk of money out of your estate in one fell swoop and front-load the 529 plan with a large sum that can immediately begin compounding upon itself. And if a beneficiary decides they don’t want to go to college, the account owner can change the beneficiary to another qualified family member, penalty-free. It’s easy to see why 529 accounts are such a popular method to save and invest for education expenses. If you are interested in learning more, click here to read our special report or listen to our podcast on 529s. ***** 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 also find two new Market Takeaways videos on our website, featuring EquityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. Research Analyst Kate Austin with a look at the slew of public companies that have filed for bankruptcy protection and Vice President Steve Johnson on the importance of separating investment decisions from events in the headlines. Looking Ahead Next week, we’ll get backward-looking reads from April on construction spending, car sales and factory orders, as well as May reads on manufacturing and the service sector. But the main focus will be on May jobs data, including last month’s unemployment figure. You know our stance: May data matters much more than March or April data. June data will matter more than May data. July data may matter as much or more than June data. And medical data remains our foremost focus. As always, please 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 Investments 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, and have nearly 4,000 clients across the country and over $7 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. Our minimum account size is $350,000. 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. 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