Trying to Flatten the Curve April 6, 2020 Weekly Update Print Please note: This update was prepared on Friday, April 3, 2020, prior to the market’s close. The fog of uncertainty remains thick as we, and the nation’s leaders, try to get a clearer understanding of the impact the current pandemic will have on our nation’s health—both medically and economically. Flattening the curve by staying at home and practicing social distancing appear to be key to slowing and hopefully ending this distressing situation. In the meantime, our team is actively taking stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. of the changing situation and keeping close watch over our strategies. We are continuously gathering and analyzing the data with an eye toward getting a clearer picture of where we are and where we may be headed. Through Thursday, the Dow Jones Industrial Average and the broader S&P 500 index have fallen 24.5% and 21.4% for the year, respectively. The MSCI EAFE index, a measure of developed international stock markets, is down 25.5%. 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 had fallen to 1.58% from 1.71% last week and 2.31% at 2019’s 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 3.3% for the year. A Message From President and CEO Dan Silver We take our responsibility as your trusted investment partner seriously—through good planning and a bit of luck, we’ve been able to seamlessly maintain our high standards for serving you during these difficult times. The entire team at Adviser Investments is ready to help you however we can. To that end, President and CEO Dan Silver recently recorded a video message to tell you where we stand and to apprise you of the wide array of resources we’ve put together. Please give it a look. Assessing Job Losses Yesterday morning, just hours before the actual numbers were released, Bloomberg Economics was forecasting new unemployment claims would “surge” to 3.7 million for the prior week. The actual number? 6.6 million, almost double the experts’ predictions—a stunning illustration that analysts of all stripes are stumbling around in the dark. We are continuously gathering and analyzing the data with an eye toward getting a clearer picture of where we are and where we may be headed. Coming on the heels of the prior week’s staggering 3.3 million claims, that makes nearly 10 million people who’ve recently lost their jobs, or 6% of the U.S. labor force. Put another way, approximately one out of 15 workers made a new claim for unemployment benefits between March 15 and March 28. Adding to the toll the coronavirus is having on the jobs market, today’s monthly U.S. unemployment report for March showed employers cutting jobs, rather than adding them, for the first time since September 2010. March’s 4.4% unemployment rate, up from 3.5% last month, is likely to double or triple when we get April’s read, since the March numbers were compiled before the month ended. It’s a vicious circle, as slowing economic activity has caused job losses, which, naturally, is causing further cutbacks in consumer spending. In one sense, the coronavirus has effectively flipped a switch and turned off large parts of the economy. The questions now are: How long will the lights stay off? How bad will it get for people in the dark? And how quickly will the lights come back on when we flip the switch back on? It’s worth noting, though, that the stock market’s moves don’t always correlate with economic statistics. On March 26, when the 3.3 million unemployment claims number was released, the stock market rose 6% as news of massive economic stimulus grabbed the headlines. This past week’s 6.6 million claims number was also followed by a stock market gain—the Dow closed up 2.2% for the day. As we’ve noted before, we are living through an unprecedented period. But we also fully believe that this too shall end, and a recovery, however short or long it takes, will arrive. Bad Times Foretell Better Ones One thing history tells us again and again is that some of the stock market’s worst losses are followed by some of its best gains. To illustrate the point, we took a look at Vanguard’s 500 Index fund, which seeks to mimic the S&P 500 index. The fund’s 12.4% March decline ranked as the fund’s fourth-worst month since its 1976 inception. However, in the past, those other bad months have tended to signal decent times to be buying rather than selling. Since inception, 500 Index has averaged a 12.4% gain over rolling 12-month periods. Looking solely at the fund’s 12-month returns following its 10 worst months, excluding March 2020, shows an average gain of 22.2%, or almost twice the historical average. Sources: Adviser Investments, Vanguard. No one knows what the next 12 months will bring to the market, but in the past, buying when others were despairing proved to be a profitable strategy—not every time, but over time. ***** Financial Planning Focus: Relief Legislation Measures to Be Aware Of On March 27, the federal government passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. It is intended to dull the economic blow that this virus has and will continue to dole out to families and the nation. Here are some relevant provisions of the CARES Act to know about, along with links to more detailed information in the Investing for Life section of the Adviser Investments website: Direct Payments to Taxpayers: Congress has authorized one-time payments of up to $1,200 per individual taxpayer, plus an additional $500 for each qualifying dependent child. The payouts are tied to your income level—higher earners are phased out. Click here to read more and to find out if you qualify. Required Minimum Distributions Waived: The bill waives required minimum distributionsA required minimum distribution is the amount of money that must be withdrawn each year from tax-deferred retirement accounts once the beneficiary reaches retirement age (72, according to IRS rules). (RMDs) for 2020. In short, any retiree who’d prefer not to withdraw money out of their retirement accounts in a down market (and isn’t relying on RMDs to pay current expenses) doesn’t have to. The waiver applies to a broad range of retirement accounts, including traditional IRAs, SEP IRAs, SIMPLE IRAs, inherited IRAs, 401(k) plansA 401(k) plan is a retirement account that a company sets up on behalf of its employees. Both the participant and the employer can contribute to the account. There are two types of 401(k)s, traditional and Roth. Income invested in traditional 401(k)s isn’t taxed while it’s invested, but is taxed when it’s withdrawn. Income invested in a Roth 401(k) is taxed before it’s invested, but no tax is paid when it is withdrawn., 403(b) plans and government-sponsored 457(b) plans. For more details, click here. COVID-19 Penalty-Free Withdrawals: Individuals directly impacted by the coronavirus are eligible to withdraw up to $100,000 from their retirement accounts, penalty-free. Furthermore, the mandatory federal withholding requirement of 20% is also suspended from these distributions. Be aware, however, that the distribution is still subject to ordinary income tax. Click to read about qualifying events and more. Robust Unemployment Benefits: With skyrocketing unemployment, the federal government has added a slew of benefits as part of the CARES Act, including bumping unemployment compensation up by $600 per week for four months. The Act eliminated the one-week waiting period that typically comes with filing for unemployment, allowing individuals to begin receiving benefits immediately. Small Business Relief: Virus-impacted businesses of up to 500 employees will be able to take out a loan of up to $10 million, which may be forgiven if that loan is used for payroll and other business expenses. The Act has also suspended the employer portion of the Social Security payroll tax to begin on January 1, 2021. Here’s more from the Treasury Department. And More: Our CARES Act blog post also discusses virus-related charitable contributions, Medicare provisions for retirees and student loan relief. It’s a lot to take in, and there’s already talk of more legislative action to come. We’ll provide more insights as the intricacies and impacts of these stimulative measures become clearer. ***** Our Continuing Coverage of the Coronavirus Pandemic As we mentioned last week, for timely updates on what our investment team is seeing, check out Today’s Market Takeaways, which we will be posting to our Investing for Life page on Monday mornings and Friday afternoons. This week, 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 previewed the week to come, and Portfolio Manager Steve Johnson offered a weekly wrap. As a reminder, all of the resources we’ve produced in response to the virus, including our podcasts, blog posts, special reports and videos, can be found on Adviser Investments’ Pandemic Coverage page. ***** Stay Well and Stay in Touch The longer that social distancing continues, the more the emotional and psychological effects of isolation can add up. Remember, we are here for you—never more than a call away. Please take advantage of us. We’d love to hear from you. The cold truth: While the data is likely to be harsh and stark, the more data we have, the better able the markets will be at pricing in the downside 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. of this event. 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, 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, April 3, 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. Past performance is not an indication of future returns. 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