Home Guides & Resources chevron_right Weekly Update Vaccine News Sparks Rally—and Rotation November 16, 2020 Table of Contents An Auspicious (or Anticlimactic) Rally? Jobs Return, But Pace Concerns Podcast: How Does the Election and a Vaccine Impact Future Earnings? Retirement: Catch-Up Contributions Strategy Activity Update Adviser Investments’ Market Takeaways Looking Ahead Please note: This update was prepared on Friday, November 13, 2020, before the market’s close. StocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. shot up on Monday following a game-changing announcement from Pfizer that their COVID-19 vaccine was over 90% effective based on initial Phase 3 study results. This promising development, as well as an end to much of the election uncertainty, not only sparked a rally but also a rotation away from technology and other high-flying growth stocksA stock whose issuing company is expected to grow at a significantly higher rate than the market. in favor of value stocksA stock that is statistically cheap as a multiple of its earnings or book value, as compared to the overall stock market., including badly battered sectors like travel and energy. That rotation, though, began to unwind as the week progressed. Set against this upbeat, if not unusual, market backdrop is the harsh reality that the U.S. recorded more than 150,000 new coronavirus cases on Thursday for the first time since the pandemic took hold roughly nine months ago. Parts of the country have announced new restrictions and school closings. In other words, investors remain betwixt and between: COVID-19 vs. the economy, second wave vs. a viable vaccine, immediate stimulus needs vs. 2021 infrastructure stimulus boost, and so on. As always, the markets marched on: Through Thursday, the Dow Jones Industrial Average was up 3.9% for the year, while the broader S&P 500 index had returned 11.2%. Foreign stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. are showing fractional gains for the year with the MSCI EAFE index, a measure of developed international stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. markets, returning 0.3%. 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 6.7% this year. An Auspicious (or Anticlimactic) Rally? In some parts of the stock market, we packed a year’s worth of returns into one week—or into a single day in the case of the energy sector, which gained 14% on Monday alone. But though Monday’s wild ride was over almost as swiftly as it began, perhaps it provided a glimpse into what 2021’s market might look like. The rally was short-lived, partly due to lingering questions and concerns about how (and how soon) Pfizer’s vaccine can be effectively distributed. But a dose of reality didn’t keep many market-watchers from predicting a decisive turn in the market. Headlines such as “Value Stocks In, Growth Stocks Out” and “The Tech Rally May Be on Its Last Legs” peppered news alerts and financial websites this week. Monday’s swift shift in sentiment serves as a helpful reminder that 2021’s market darlings may look different than today’s as underperforming sectors bounce back. Fortunately, our models are ready for 2021’s market marathon and fully prepared for swings and uncertainty. Things can change fast on Wall Street—but that’s exactly what our models are designed to deal with. Jobs Return, But Pace Concerns With election and vaccine news hogging the headlines, you may have missed last Friday’s jobs report. The U.S. Labor Department announced that the unemployment rate fell a full percentage point in October to 6.9% from September’s 7.9%. That’s progress, but we are still 3.7 million jobs shy of the pre-pandemic peak. If unemployment continues to decline at the same rate it did in October, economists estimate it could take two years for jobs to return to pre-pandemic levels…or perhaps as long as three or four years if the rate moderates further. That’s without a vaccine. A vaccine changes the game. We believe there is a lot of pent-up demand that will be unleashed once we can relax social-distancing concerns. Unshackle the U.S. consumer and jobs are likely to come back at a much faster pace. To say there’s work to be done is a double entendre. How quickly jobs return and the economy rebounds will be determined in large part by how well we manage the pandemic. Podcast: How Does the Election and a Vaccine Impact Future Earnings? How are recent headline events likely to impact earnings and outlooks as companies grapple with renewed coronavirus challenges? Join Director of Research Jeff DeMaso and DividendA cash payment to investors who own stock in the company. Income Portfolio Managers Charlie Toole and Steve Johnson as they answer the following questions: Is it time for investors to be bullish? Which slumping market sectors offer the best opportunities? Can technology stocks maintain market leadership? How will a new administration’s policies affect the market? For more on how headline news impacts the earnings picture, click to listen now! Financial Planning Focus: Planning in Your 50s: Catch-Up Contributions Turning 50 is momentous for so many reasons—including the extra boost you can provide to your retirement savings. The Internal Revenue Service (IRS) allows investors to contribute to tax-advantaged retirement accounts up to a specified limit per calendar year. In 2020, that limit is $6,000 to individual retirement accountsA type of account in which funds can be saved and invested without being subject to tax until the account holder reaches retirement age. (IRAs) and $19,500 to 401(k)s and other workplace retirement plans such as 403(b)s and Thrift Savings Plans. At Adviser Investments, we encourage all clients to make consistent contributions to these accounts every year. But the truth is, many people don’t even come close to maxing out their retirement account contributions—especially in their younger years. And that can leave individuals lagging where they need to be as retirement approaches. That’s why your 50th birthday is such an important milestone: It’s the point where the IRS lets you start playing catch-up. For most people, their 50s are their peak earning years. Making catch-up contributions to your retirement funds can help you compensate for any deficit in your savings while still giving your investments a decade-plus to compound. If you have the cash flow to max out your retirement accounts in your 50s and also make catch-up contributions on top of that, we highly recommend that you do so. In 2020, the IRS allows anyone over 50 to contribute an additional $1,000 to an IRAA type of account in which funds can be saved and invested without being subject to tax until the account holder reaches retirement age. and an additional $6,500 to a workplace retirement plan. What if you are already maxing out your 401(k) and IRA limits each year? Should you go beyond that? The answer depends on your individual situation. One rule of thumb is to aim to put 10%–15% of your salary toward retirement at this stage in your life. Higher earners should note that there are phaseout and upper income limits over which you are unable to take full advantage of a traditional IRA’s tax deduction or that make you ineligible to contribute to a Roth IRA, but those limits do not prevent you from earmarking other taxable investments for your retirement. (We list those limits for tax-year 2020 on page 2 of our Key Financial & Tax Planning desk reference piece.) That said, don’t worry too much about hitting an arbitrary threshold. We advise our clients to save as much as they are reasonably able. Strategy Activity Update To keep you informed about your investments with us, going forward, we will be providing a summary of the trades executed in our Dividend Income, Tactical Global Growth, Tactical Defensive Growth, Tactical High Income and Tactical Multi-Asset Income strategies, as well as a snapshot of each tactical portfolio’s allocation every week as of Thursday night. Please contact us if you have any questions about any of the moves or our strategies. Dividend Income Sold Altria (ticker: MO) and Pfizer (PFE); reduced Nestle (NSRGY); bought Honeywell (HON) and Accenture (CAN); increased Merck (MRK). AIQ Tactical Global Growth Bought VanEck Vectors Semiconductor ETFA 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. (SMH); reduced cash position. AIQ Tactical Defensive Growth Bought iShares S&P 500 ETF (IVV); reduced cash position. AIQ Tactical High Income No trades this week. AIQ Tactical Multi-Asset Income Sold iShares MBS ETF (MBB); bought Vanguard Global ex-U.S. Real Estate Index ETF (VNQI). Adviser Investments’ Market Takeaways You can find two new Market Takeaways videos on our website. Research Analyst Liz Laprade spoke about what we can learn from Monday’s mad rally and Vice President Steve Johnson spoke about the unexpected market side effects of the COVID-19 vaccine news. Looking Ahead Next week offers a plethora of data on the housing market, with reads on permits, starts, existing home sales and builder’s sentiment, as well as retail sales, regional gauges of economic activity and leading economic indicators. 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, 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. Please note: This update was prepared on Friday, November 13, 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. Purchases and sales of securities listed above represent all securities bought and sold in each strategy during the period stated. Each strategy’s portfolio generally includes more holdings in addition to the transactions listed above and in some cases the securities listed above may only represent a small portion of the particular strategy’s complete portfolio. Further, the securities listed above are not selected for listing based on their investment performance; thus it should not be assumed that any of the securities listed above were profitable or will be profitable, nor should it be assumed that future recommendations will be profitable. Clients and prospective clients should only make judgements about a strategy’s performance after reviewing the strategy’s composite performance information. 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