Markets Fall as COVID-19 Cases Jump November 2, 2020 Weekly Update Print Please note: This update was prepared on Friday, October 30, 2020, before the market’s close. StocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. fell this week on a combination of pre-election uncertainty and steeply rising COVID-19 cases. Not even the high-flying tech stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. were able to hold the line, as Facebook and Apple sold off on Friday morning after their earnings reports disappointed traders. In the near term, medical data and politics are driving market momentum. Longer term, earnings, interest rates and economic data are key. Our portfolios are designed to allow us to manage through myriad short-term risksThe 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. while we pursue long-term opportunities. Divergence among sectors, firms and industries has been one of the strongest trends in the economy since the pandemic began, and one of the most glaring examples is the returns for the two best-known U.S. stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. indices. Through Thursday, the Dow Jones Industrial Average is down 4.8% for the year, while the broader S&P 500 is up 4.0%. The MSCI EAFE index, a measure of developed international stock markets, is down 10.3% 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 1.23%, 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 6.4% this year. Growth Is Good; More Is Needed Just days away from the election, the pundits are having a field day with poll numbers. At Adviser Investments, we’ve been focused on a different number: The first estimate of how quickly the economy rebounded during the just-ended third quarter. The Bureau of Economic Analysis said Thursday that the U.S. economy expanded at a 33.1% annualized rate in July, August and September—subject to revision of course. That number represents 7.4% growth since the end of June, bringing the size of the U.S. economy up to about $18.6 trillion, which remains $670 billion, or 3.5% below where it stood at the start of the year. That’s a lot of shrinkage even after a record-setting quarter of growth. And it’s almost $1 trillion smaller than where the economy would have stood had we continued on the growth path established in the second half of 2019. Note: Chart shows inflation-adjusted Gross Domestic Product values using reported numbers from the Bureau of Economic Analysis as well as estimates from a survey of market analysts and a hypothetical growth path had there been no recession in 2020. Sources: The Bureau of Economic Analysis, The Wall Street Journal, Adviser Investments. Still, the latest growth figure is better than what some economists had predicted and, overall, a very positive report. Growing 7.4% in three months is a solid start to digging ourselves out of the hole we found ourselves in just a few months back. But we need to keep things in perspective. As is true for our day-to-day lives, the U.S. economy has a long way to go before it’s fully back to normal—and it will take more than three or even six months to get there. Stimulus Decision May Fall to Fed With Congress in recess until after the election—and with the possibility of a contested outcome still in play—it seems all but certain that the U.S. economy won’t be getting any additional fiscal stimulus before the end of the year. In contrast, the European Central Bank (ECB) announced this week that they will be putting together a stimulus package for December to help ease the economic burden as cities from Dublin to Paris to Munich have announced lockdowns. Some may see the lack of stimulus in the U.S. as a bullish sign—that somehow policymakers believe we’re on a recovery course and additional support is not needed. We disagree and think that the ECB is on the right track. With Congress out of action and U.S. COVID-19 infections hitting an all-time high on Thursday, all eyes now turn to the Federal Reserve and their announcement next week on interest rates. Fed Chair Jerome Powell’s live press conference is always the day’s main event, but given coronavirus concerns and the fact that it will fall the day after the election, this could be the press conference of the decade. Stay tuned. ***** Financial Planning Focus: Financial Planning in Your 40s You’re well-established in your career and hopefully earning more than you spend. You may have your own family as well as aging parents to look out for. On top of that, you’re nearly starting to look ahead towards retirement. That’s a lot to manage—and financial planning can help. Here are five tips to strengthen your financial foundation during your 40s: Protect Yourself With Insurance. You can’t put a price on peace of mind. Disability insurance can help protect your income if you are unable to work. Life insurance can help provide for your loved ones if you pass away. Health insurance is an absolute necessity. Homeowners insurance is another essential. And consider a personal umbrella liabilityLiabilities are calculated by adding up your existing debts (mortgage, car loans, student loans, credit cards, etc.). policy that is roughly equal to your increasing net worth. Focus on Retirement Savings. If you don’t already, begin contributing at least 10% of your pre-tax income (or up to the annual limits if you can afford it) to your retirement savings accounts (e.g., 401(k), IRAA type of account in which funds can be saved and invested without being subject to tax until the account holder reaches retirement age., etc.) right away. Yes, you can include employer contributions, if any, in your tally. Consider bumping up your contribution percentage every time you receive a raise. Invest Outside of Retirement Accounts. In addition to participating in your employer-sponsored retirement plan, consider opening a brokerage account to grow your savings above what you’d earn in interest with a bank account. If you have children, give us a call about setting up a 529 plan to prepare for their future educational expenses. Talk to Your Parents About Finances. Your parents may be nearing or into retirement. Now is a great time to have an honest discussion with them about their plans as well as their finances. This will give you visibility into whether you may need to provide them with some support in the future. For more information, listen to our podcast on the topic. Create a Financial Plan. As your financial situation becomes more complex, it’s even more important to have a clear view of your assets, liabilitiesLiabilities are calculated by adding up your existing debts (mortgage, car loans, student loans, credit cards, etc.). and broader financial status. A tailored financial plan will provide that. This list is certainly not exhaustive, so consider speaking to a professional if you have questions about your own financial plans during this important decade. ***** 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 whether big tech’s outstanding stock performance will be imperiled by federal antitrust actions and Vice President Steve Johnson talked about how traders’ reaction to news can be bigger than the event that triggered it. Looking Ahead Next week brings several key economic reports, including reads on manufacturing and service sector activity, construction spending, car sales, ADP and non-farm payroll jobs reports and news from the Federal Open Market Committee (FOMC) meeting. 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 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, trusts, institutions and foundations since 1994, and have more than 3,500 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. Please note: This update was prepared on Friday, October 30, 2020, before the market’s close. This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. 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