Impeachment Is a Political (Not a Market) Event - Adviser Investments

Impeachment Is a Political (Not a Market) Event

December 20, 2019

The 2019 bull market continued charging into year-end, hitting a series of record highs despite the drama of President Trump’s impeachment.

Because impeachment felt inevitable, we’ve been focused on whether and how the process might impact the broader economy or the investment markets. So far, it’s been a non-event. And if the party-line vote in the House to impeach is followed by a party-line vote in the Senate to acquit, we expect the market reaction to be negligible. (The Senate voting to convict the president is not priced in to current levels, however.)

Similarly, last week’s U.K. elections delivered an expected result both politically and market-wise. And while Britain’s FTSE 100 stock market index remains 4% below its May 2018 peak, the broader European Stoxx 600 index rallied to new highs.

Recent events have yielded one significant change with regard to both impeachment and Brexit: We now have probable ends in sight. The removal of one or both uncertainties in the coming weeks will be welcome news given the host of other risks we’ll have to contend with along 2020’s course.

For the year through Thursday, the Dow Jones Industrial Average and the broader S&P 500 index have returned 24.6% and 30.4%, respectively. The MSCI EAFE index, a measure of developed international stock markets, is up 21.1%. As of Thursday, the yield on the Bloomberg Barclays U.S. Aggregate Bond index has declined to 2.35% from 2.38% last week, and from 3.28% at 2018’s end. On a total return basis, the U.S. bond market has gained 8.6% for the year.

2019’s Volatile Headlines Haven’t Translated Into Market Volatility

While 2019 has felt wildly volatile, actual market volatility was low. Case in point: The political news this week may have been momentous, but looking at the stock market you wouldn’t have guessed anything historic had occurred. The S&P 500 index closed at a record high on Tuesday night and only declined 0.04% on the day of the impeachment vote. It then rallied to yet another record high on Thursday.

Despite all the headline risks—from impeachment to Brexit to trade wars—it has been a remarkably calm year for the stock market. We’ve only seen 37 days when the S&P moved up or down by 1% or more from the prior day. And there have only been seven 2%-plus-move days. Those are some pretty low numbers.

Maybe more importantly, the stock market’s largest drawdown this year was just 6.8% in June. The average intra-year decline over the last 35 years has been about 13%.

Note: Chart shows the number of days each calendar year that the S&P 500 index closed 1%-plus and 2%-plus higher or lower than the prior day’s closing level.
Sources: S&P Dow Jones Indexes, Adviser Investments.

Beneath Bouncy Headlines, Economy’s Steady

Not only have markets been relatively quiescent this year, the economy has also been chugging along at a steady pace. Revised GDP figures released this morning by the Bureau of Economic Analysis show no change from prior estimates: The U.S. economy grew at a 2.1% rate in the third quarter.

While a resolution to or escalation of the U.S.-China trade dispute retains the power to jolt both the economy and markets, the fundamentals of low interest rates, a strong job market and a financially steady consumer suggests the economy is still firmly on slow-growth rails.

New Podcast: The Taxman Cometh

We spend our working years growing our tax-deferred investment accounts like 401(k)s, 403(b)s and IRAs. But once we reach age 70½, the IRS requires that we start withdrawing our savings (thus giving Uncle Sam his annual income-tax cut) through what’s known as required minimum distributions (RMDs). Understanding how RMDs work so you can both avoid costly penalties and account for your tax liability is a critical element of every investor’s spending and saving strategy in retirement.

In our latest podcast, Dina Milne and Alec Rosen, two of Adviser Investments’ experienced wealth managers, focus on RMDs by using real-world examples and sharing some tips and tactics we employ for our clients that can benefit anyone in or nearing retirement. Among the discussion topics:

  • How RMD amounts are calculated
  • The tax and legacy implications
  • The IRS penalties you need to avoid
  • How you can use RMDs for charitable purposes

It’s never too soon to become more informed about financial planning in retirement. To learn more, click here to listen to this critical podcast today!

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Financial Planning Focus

Year-End Financial Planning Tips

The last few weeks of the year can be joyful, but also hectic and disorganized. From a financial point of view, there are a few steps you can take now that can help you start 2020 off on sound footing and pay great dividends over the next 12 months:

  1. Top off your rainy-day stash of cash. It’s been a bountiful ride for the markets in 2019, and many investors are fortunate to find themselves in a stronger financial position at the end of this year than last. So now may be the perfect time to hedge against future uncertainty in the markets. One of the best ways to prepare for future dips is to make sure you have enough cash to cover living expenses—that way, you can avoid drawing on investments in a falling market. We usually recommend holding at least a year’s worth of expenses in savings, preferably in a money market fund, which provides instant liquidity.
  2. Reread your estate plan. Our general advice is to closely go over and revise as necessary your will, trusts, powers-of-attorney, health care proxies and living will with your estate attorney every five to seven years. But doing a year-end check-in yourself doesn’t hurt—give your plans a once-over to make sure they’re still fully in line with your wishes and circumstances. (For example, if you’ve begun to see a new doctor, make sure he or she is included in health care-related documents.)

    Make sure to check in on your financial plan and be sure that your savings, investment and other goals are still on track.

  3. Compile year-end financial documents. Amongst the flurry of holiday cards and credit card bills, you’re likely to receive a number of important financial documents this time of year. Tax season will be here before you know it, and by compiling your account statements, tax documents, charitable gift receipts and other financial papers in one place now, you can make your life considerably easier when it comes time to file your taxes. Our Adviser Insights portal provides a handy and secure document Vault to make it easier to keep track of all your most crucial documents electronically—and save a few trees. If you’re not already using Adviser Insights, talk to your relationship team about getting set up.
  4. Check your insurance coverage. Now is also a good time to make sure any big changes you’ve made this year haven’t led to you taking on risks that aren’t covered by insurance. For example, if you’ve completed home renovations this year, your newly spiffy digs may have increased your home’s value, meaning your current home insurance policy might not cover as much as it should. Take a look at your disability, life, long-term care, home and auto, and umbrella policies to confirm that you’ve left no flank exposed.
  5. Go over your accounts’ named beneficiaries. It’s a good practice to periodically examine who you have listed as your beneficiaries on your retirement savings plans and other accounts to be sure that they are accurate and reflect your wishes. We can lend a hand for any accounts we manage for you.
  6. Review your financial plan. Finally, make sure to check in on your financial plan and confirm that your savings, investment and other goals are still on track. Don’t have a financial plan? Reach out to our team here at Adviser Investments—we’d be happy to help you organize, review and plot your strategy for 2020. It’s one of the best gifts you can give yourself and your loved ones.

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Looking Ahead

In a slow news week punctuated by the Christmas holiday and market close on Wednesday, you can fit all of the upcoming economic reports on one small holiday card—new home sales and durable goods orders are the only substantive reads on tap.

Speaking of the holidays, our offices will close at 1 p.m. next Tuesday and remain closed Wednesday, Christmas Day. It’s been a busy year for us at Adviser Investments, one made memorable and meaningful by our work with our clients. We wish you and your families a joyous and prosperous holiday season. Happy holidays!


Please note: This update was prepared on Friday, December 20, 2019, prior to the market’s close.

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