2020 + The Year of the Roth IRA Conversion

2020 + The Year of the Roth IRA Conversion

 

LUTZ BUSINESS INSIGHTS

 

2020 + The Year of the IRA Roth Conversion

2020 + the year of the roth ira conversion

nick hall, investment adviser

 

In 2016, I discussed whether Roth IRA conversions make sense for you as an investor (read here). A Roth IRA conversion is the process of moving funds from a Traditional IRA to a Roth IRA. In most instances, this triggers an ordinary income tax event in the year the conversion happens for the amount moved to the Roth IRA.

A 2010 tax law change brought accessibility of Roth IRA conversions to more investors by eliminating the income limit to effectuate a conversion- allowing a taxpayer to do so regardless of his or her earned income in a given year. A lot of the same premises I spoke about in 2016 still hold true today, and I will discuss why 2020 might be the ideal time to do a larger Roth IRA conversion.

 

Salary Reduction, Lower Income Due to Covid-19, Earlier Retirement, and the Retirement Income Gap

2020 has been nothing short of an unprecedented year in a multitude of ways. Over the past seven months, individuals and economies around the world have been wrestling with the COVID-19 pandemic. This once-in-a-century pandemic has wreaked havoc and disruption on many businesses and industries.

Here in the United States, we have experienced levels of unemployment not seen since the Great Depression. Individuals who were fortunate to stave off unemployment may have taken a sizable pay cut due to revenue loss, reduced salary, forced furlough, elimination of bonus, reduced sales commission, etc. Lower income, if only temporarily, lends itself to lower marginal income tax brackets and presents a great opportunity to accelerate income this year or next year at these lower brackets. Enter the Roth IRA conversion.

One of my favorite strategies for Roth IRA conversions with clients is to convert in what I call the “Retirement Income Gap.” This is the period after retirement but before receiving retirement income from sources like pensions, Social Security, and required minimum distributions (RMDs).

The COVID-19 pandemic has pushed some people into retirement earlier and accelerated the timeline for this retirement income gap. The traditional age for this income gap is taxpayers in their late 50s or early 60s who are retired but not taking Social Security retirement benefits or mandated to take RMDs (now age 72 as of 2020). Much like someone with reduced income in 2020, the concept is to accelerate income via a Roth IRA conversion at more favorable Federal tax rates (i.e. 12%, 22%, or 24%) while your taxable income is temporarily lower than it will be after age 72 or when you return to pre-pandemic income levels.

 

Tax Flexibility and Future Tax Rate Uncertainty

As I wrote in 2016, tax rate uncertainty is one of the biggest threats or unknowns to retirees who are in the distribution phase of drawing on a portfolio of assets to maintain a desired retirement lifestyle. The Tax Cuts and Jobs Act of 2017 further reduced marginal income tax rates across the board. The chart below from the Center on Budget and Policy Priorities shows the top marginal tax bracket every year post- World War II:

 

 

As you can see, we are in a period of historically low tax rates right now. These so-called Trump tax cuts are set to expire at the end of 2025. At that point, taxpayers in the marginal 12% Federal bracket will see tax rates move back to 2017 levels in which some of the income in the existing 12% bracket will more than double to 25%. This, of course, presumes there is no legislative change to extend these tax cuts further or the reverse, increase them before they sunset in 2025.

A Joe Biden presidential election and a Democratic Senate would likely mean proposals to eliminate the Trump tax cuts early and potentially even raise taxes across the board to above 2017 levels, especially for high-income earners. While this is mere speculation at this point, we believe tax rates will much likely be higher at some point in the future.

Having after-tax Roth IRA assets to call on protects investors from future tax rate increases over the course of a hopefully long retirement period. Many sources of retirement income (pensions, Social Security, dividends, rental income, etc.) are taxable as ordinary income and subject to the prevailing ordinary income tax rates at that given time. As such, I believe there is a lot of merit in doing a Roth IRA conversion now in a historically low tax rate environment to protect against future tax rate increases and get money in a tax-free growth bucket.

 

Downward Market Volatility

During the 1st Quarter of 2020, we saw the fastest 30% pullback in US market history. The S&P 500 ripped off around 35% of its value in a matter of five weeks. US small cap companies and value companies fared even worse during this pullback. The S&P 500 has seen a sharp rebound over the past four months led largely by the FAANGM and technology stocks to the point where it was virtually flat on the year after today’s trading session (7/28). Even though the S&P 500 has made it back to even for 2020, other slices and asset classes are still far off their all-time highs or even 12/31/2019 levels.

Prior to the Tax Cuts and Jobs Act of 2017, IRA recharacterizations or undoing a Roth IRA conversion was permitted until October of the following year. This would be done for several reasons- namely unexpected higher income that pushed a taxpayer into a higher tax bracket or large market declines after a Roth IRA conversion was done. The ability to recharacterize or unwind Roth IRA conversions would have been useful for those done in late 2019 due to the large market pullback earlier this year. The Tax Cuts and Jobs Act of 2017 effectively ended recharacterizations of Roth IRAs- making them permanent.

Since 2018 we have generally recommended waiting until late in the year (November or December) to get a clearer estimate of one’s income before doing any Roth IRA conversions. That thinking has somewhat been turned on its head in 2020 due to the big market pullback and equities being at depressed values. In fact, depending on the circumstances and situation we have recommended several larger conversions for clients in March and April that have worked out well thus far due to capturing much of the sharp rebound in the tax-free Roth IRA bucket. A market downturn or pullback could prove to be a great time to do a Roth IRA conversion because you are buying more shares of a fund or transferring more shares (if the conversion is in-kind or moving stocks or funds over without liquidating to cash first) at depressed values that now have a higher expected return going forward.

 

Spousal or Beneficiary Protection and RMD Planning

A final reason Roth IRA conversions might be a great fit in 2020 is another carryover from 2016. Roth IRA conversions today limit future RMDs from pre-tax retirement accounts. Many retirees have other sources of income in addition to RMDs, and it can create unwanted additional taxable income on top of Social Security, rental income, dividends/interest, capital gains, etc.

Upon turning age 72, the RMD amount is equal to roughly 4% of your IRA balance, with an increasing percentage every year thereafter as an individual’s life expectancy decreases. This may not be as significant for a married couple. However, widows are still subject to take RMDs of deceased spouses’ retirement accounts, and the income thresholds for single tax filers come much earlier than married joint filers.

If pre-tax IRAs are converted to Roth IRAs, it limits the amount of future RMDs and allows for the spousal protection of keeping assets in the Roth IRA to call on later when a widow is naturally in a higher tax bracket. There is the added benefit of no RMDs currently on Roth IRAs so they can remain in that tax-free bucket for a widow to cherry pick in a given year. Roth IRAs can also be passed onto children or future generations income-tax free, albeit they would then be subject to a mandated ten year drawdown period to liquidate the Roth after the IRA owner’s death.

As mentioned in my initial article, Roth IRA conversions can be a very useful tax planning tool for retirees. It offers tax flexibility in retirement and protection against future tax rate uncertainty or higher income levels for purposes of reducing future RMDs and spousal protection of single filer tax rates. 2020 is a perfect storm of sorts to do a larger Roth IRA conversion due to the disruption of income caused by the COVID-19 pandemic, historically low tax rates with a threat of legislative changes to increase marginal income tax rates, and the downward market volatility experienced so far this year. As with any tax recommendation, we encourage you to consult your CPA or tax advisor to see if and when a Roth IRA conversion makes sense for you.

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz Financial.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Lutz Financial is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Lutz Financial’s current written disclosure statement discussing our advisory services and fees is available upon request.

ABOUT THE AUTHOR

402.827.2300

nhall@lutz.us

LINKEDIN

NICK HALL, CFP® + INVESTMENT ADVISER

Nick Hall is an Investment Adviser at Lutz Financial. With 10+ years of relevant experience, he specializes in creating thorough, adaptive financial plans and investment management strategies for high net-worth families. He lives in Omaha, NE, with his wife Kiley, and daughter Amelia.

AREAS OF FOCUS
  • Comprehensive Financial Planning
  • Investment Advisory Services
  • Retirement Planning
  • Income Tax Planning
  • Social Security and Medicare Planning
  • Investment Project Research
  • High Net Worth Families 
AFFILIATIONS AND CREDENTIALS
  • Financial Planning Association, Member
  • CERTIFIED FINANCIAL PLANNER™
EDUCATIONAL BACKGROUND
  • BSBA in Finance and Business Management, Eller College of Management - University of Arizona, Tuscon, AZ
COMMUNITY SERVICE
  • Mount Michael Benedictine, Alumni Board President
  • Lutz Gives Back, Committee member
  • United Way, Volunteer
  • Salvation Army, Volunteer
  • Omaha Home For Boys, Volunteer

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Breaking Down the GDP Report + Financial Market Update + 8.4.20

Breaking Down the GDP Report + Financial Market Update + 8.4.20

FINANCIAL MARKET UPDATE 8.4.2020

AUTHOR: JOSH JENKINS, CFA

STORY OF THE WEEK

BREAKING DOWN THE GDP REPORT

Economic data dominated headlines last week following the report of Gross Domestic Product (GDP) for the second quarter. The figure, which showed economic activity declined by an annualized 32.9%, was reported as the worst on record. While the number is undoubtedly awful, it is likely somewhat overstating the depth of decline, and there are emerging signs that activity has already begun to rebound. Before we go there, let’s begin with a little bit of background. 

 

What is GDP?

GDP measures the total value of all goods and services produced in a country within a specific period of time. The data provides an assessment of the overall size and health of the economy and is the gold standard for measuring growth. GDP is calculated by the Bureau of Economic Analysis (BEA) and is published quarterly.

There are four major components used to calculate GDP:  GDP = C + I + G + (X-M)

Consumer spending typically comprises about 2/3rds of the figure, which is why consumer sentiment data is so widely followed. Given the U.S. has consistently run a trade deficit over the years (imports have exceeded exports), the trade balance component has generally been a drag on GDP.

Q2 Data

The 32.9% annualized decline in GDP during the second quarter is by far the steepest drop since record-keeping began in the 1940s. For comparison purposes, the first quarter of 1958 saw the next largest decline of 10.0%. The worst data print during the Great Recession was the fourth quarter of 2008, which saw an 8.4% decline. Last week’s report follows an annualized decline of 5.0% Q1. Two consecutive quarters of negative GDP is traditionally what signals the economy has entered into a recession. The decline in economic activity and the spike in unemployment since February was so dramatic. However, authorities did not wait for the GDP data to declare that a recession had begun.

The fall in Q2 came from a collapse in consumer spending and private investment caused by lockdowns and social distancing measures. Increases in federal government spending offset declines at the state and local levels, while the level of imports declined faster than exports, each of which made small positive contributions to the figure. 

Source: BEA

Where We Go From Here

As I mentioned at the start, the GDP decline has likely been overstated, arising from the fact that the data has been annualized. Annualizing assumes that the next three quarters will be identical to the last. This is most likely an unreasonable assumption, as much of the country was in full lockdown mode for a meaningful portion of the quarter. The non-annualized GDP figure reflects a much lower 9.5% decline in economic activity.

A surge in COVID-19 cases that began in early June has caused some states to roll back some easing of restrictions. Recently, there has been evidence the overall spread has begun to slow, and the level of economic activity has continued to be much higher than in prior months. Many economists are anticipating a return to growth in Q3. The Federal Reserve Bank of Atlanta publishes a widely followed real-time estimate of GDP (GDPNow), which is currently forecasting annualized Q3 GDP at 19.6%. Again, annualizing the data will overstate the degree of change. Some portion of the growth likely represents pent-up demand from when the economy was locked down, so the initial pace of recovery will likely moderate. Still, the return to growth would be a welcomed occurrence and would make this recession one of the shortest (albeit deepest) on record.

WEEK IN REVIEW

  • Last week the Federal Reserve announced the decision to hold interest rates steady at 0.00-0.25% following the conclusion of its Federal Open Market Committee (FOMC) meeting (as expected). It also reiterated its intention to maintain its bond purchase and other lending programs it had enacted to restore proper market functioning. At the post-meeting press conference, Fed Chair Jerome Powell reiterated the view that “the path of the economy will depend significantly on the course of the virus.”
  • The Institute for Supply Management (ISM) published its manufacturing index at the beginning of the week, which climbed to a 15-month high of 54.2%. The index generally reflects the rate of change in activity and not the actual level. As a result, it appears the manufacturing sector is improving but remains at a much lower overall level than it did before the pandemic. Later this week, we will get ISM’s non-manufacturing index (Wednesday), initial & continuing jobless claims (Thursday), and headlining the week of economic data will be the jobs report (Friday).
  • 63% of the companies in the S&P 500 have reported earnings for the second quarter. If you blend the earnings growth rate of the companies that have already reported, with the estimates from the companies that have yet to report, Q2 earnings growth is currently -35.7%. This represents an improvement over the -44.1% expected at the beginning of the quarter. Reports published last Thursday showed Apple, Facebook, Amazon, and Alphabet all beat earnings estimates, which contributed to the improved blended earnings growth rate.

HOT READS

Markets

  • Fed Holds Rates Steady, Says Economic Growth is ‘Well Below’ Pre-Pandemic Level (CNBC)
  • Covid Supercharges Federal Reserve as Backup Lender to the World (WSJ)
  • High Frequency Indicators for the Economy (Calculated Risk)

Investing

  • Does a Mutual Fund’s Past Performance Predict Its Future? (Yale Insights)
  • Big Tech Faithful Shouldn’t Ignore Antitrust Risk (Bloomberg)

Other

  • How Tech is Packing Empty Stadiums with (Fake) Raucous Crowds (Protocol)
  • Covid-19 Prompted Purdue University to Shut Its MBA Program. More Closures Are Expected. (WSJ)

MARKETS AT A GLANCE

Source: Morningstar Direct.

Source: Morningstar Direct.

Source: Treasury.gov

Source: Treasury.gov

Source: FRED Database & ICE Benchmark Administration Limited (IBA)

Source: FRED Database & ICE Benchmark Administration Limited (IBA)

ECONOMIC CALENDAR

Source: MarketWatch

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ABOUT THE AUTHOR

402.763.2967

jjenkins@lutz.us

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JOSH JENKINS, CFA + SENIOR PORTFOLIO MANAGER & HEAD OF RESEARCH

Josh Jenkins is a Senior Portfolio Manager & Head of Research at Lutz Financial with over nine years of investment experience. He is responsible for assisting clients in the construction, selection, and risk assessment of their investment portfolios. In addition, Josh will provide on-going research and trade support.

AREAS OF FOCUS
  • Asset Allocation & Portfolio Management
  • Investment & Market Research
  • Trading
AFFILIATIONS AND CREDENTIALS
  • Chartered Financial Analyst (CFA)
  • Chartered Financial Analyst Institute, Member
  • Chartered Financial Analyst Society of Nebraska, Member
EDUCATIONAL BACKGROUND
  • BSBA, University of Nebraska, Lincoln, NE

P: 402.827.2300 | F: 402.827.2319 | E: contact@lutzfinancial.com | 13616 California Street | Suite 200 | Omaha, NE 68154

All content © 2017 Lutz Financial  | Important Disclosure Information |  Privacy Policy

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Lutz adds Bethany Hofstetter to Hastings Office

Lutz adds Bethany Hofstetter to Hastings Office

 

LUTZ BUSINESS INSIGHTS

 

Bethany Hofstetter

Lutz adds Bethany Hofstetter to Hastings Office

Lutz, a Nebraska-based business solutions firm, welcomes Bethany Hofstetter to its Hastings office.

Bethany joins Lutz’s firm administrative department as a Receptionist. She is responsible for creating an exceptional experience for clients and visitors. In addition, she will manage all client inquiries, coordinate communication, and perform other administrative duties as needed. Hofstetter received her Associate’s degree in business administration from Southeast Community College.

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OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

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Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Lutz adds McKenzie Bruce as Staff Accountant

Lutz adds McKenzie Bruce as Staff Accountant

 

LUTZ BUSINESS INSIGHTS

 

McKenzie Bruce

Lutz adds McKenzie Bruce as Staff Accountant

Lutz, a Nebraska-based business solutions firm, welcomes McKenzie Bruce to its Omaha office.

McKenzie joins Lutz’s tax and client accounting services departments as a Staff Accountant. She is responsible for providing outsourced accounting assistance to clients in a variety of industries. In addition, she provides tax consulting and compliance services for clients with a focus on individual and business income tax. Graduating from the University of Nebraska-Omaha, Bruce received her Bachelor’s degree in Accounting and Real Estate & Land Use. McKenzie previously interned with Lutz during the 2019 and 2020 tax seasons.

RECENT POSTS

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Toll-Free: 866.577.0780  |  Privacy Policy

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OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Breaking Down the GDP Report + Financial Market Update + 8.4.20

Gold Has Outshined in 2020 + Financial Market Update + 7.28.20

FINANCIAL MARKET UPDATE 7.28.2020

AUTHOR: JOSH JENKINS, CFA

STORY OF THE WEEK

GOLD HAS OUTSHINED IN 2020

The price of gold has been on a tear recently, with a year-to-date return of 27.1%. The precious metal is even outpacing the frothy NASDAQ 100 (22.2%) and is trailing only silver (37.3%), which trades like a higher-beta version of gold. Last Friday, gold futures hit a milestone by surpassing its previous all-time high closing price set in September of 2011.

Source: WSJ, data from FactSet

There are several potential reasons for the rally in gold:

  • Inflation fear
  • U.S. Dollar weakness (currency risk)
  • Geo-political risk
  • Low nominal yields and negative real yields
  • Fear of missing out (FOMO)

The first four catalysts listed above represent common arguments that have historically been used to justify purchasing gold. Each of them applies to today’s environment to some degree. The fifth reason is a behavioral one and relates to the tendency of investors to throw money at recent winners. This has been on full display during the first half of 2020. According to Morningstar data, equity funds have seen over $100 billion in outflows through June, while the top two gold tracking ETFs (GLD/IAU) collectively have taken in about $20 billion.

Although the proponents of gold investing commonly cite the reasons above, studies have shown that traditional stocks and bonds actually do a better job of addressing them[1]. For example, due to the high volatility in the real price of gold, it has only been a reliable inflation hedge over very long periods of time, likely exceeding most investor’s investment horizons.

Since gold became legal for individuals to own (1/1/1975), it has underperformed the return on the S&P 500 index on an annualized basis[2]: 5.4% for gold versus 12.0% for the S&P 500. This likely makes the stock market a superior place to invest for those that are concerned about inflation or want to increase their expected return due to low interest rates. Investors concerned about potential weakness in the U.S. dollar could be better served by diversifying their portfolio globally. Declines in the dollar translate into a gain for U.S. based investors that purchase assets in an appreciating currency. Similar to the U.S. market, international stocks have also outperformed gold since 1975[3]: 9.4% for international stocks versus 5.4% for gold.

Stocks may be better suited than gold to protect against inflation and dollar depreciation. They also offer the potential for returns in a low-to-negative yield world. Similarly, bonds may be better than gold in a flight to quality scenario. When geopolitical fears or other risks surface, investors want to ensure they are sufficiently diversified. Gold can effectively accomplish this task. With a long-term correlation that is effectively zero[4], the typical ebb and flow of stock prices have no bearing on the price of gold. High-quality Treasury bonds, however, take the diversification benefit a step further. The 10-year correlation of intermediate-term Treasury bonds and the S&P 500 is -0.37[5]. Here, a negative correlation means that when stocks fall, bonds tend to rise. This is a particularly attractive feature during periods of extreme market stress.

The superior returns generated by the stock market arise from the fact that businesses generate cash flow that can be reinvested. Reinvestment allows these companies to expand their operations, which increases their ability to generate even more cash flow, and so on in a virtuous cycle that has been a miracle of wealth creation. Gold, on the other hand, does not generate earnings or anything of similar value. Its ability to deliver a return rests solely on the belief that somebody in the future will be willing to pay you more than what you originally paid. 

Warren Buffet shared his thoughts on the subject in the 2011 Berkshire Hathaway shareholder letter. At the time this was published, gold was still trading near its previous peak:

“Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.

Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.”

There is nothing to say the price of gold cannot increase significantly from here, particularly with a new crop of retail traders ready to pile into any asset with momentum. The bottom line, however, is that gold should not be counted on to generate long-term wealth as well as stocks or to diversify stocks as well as bonds. There can and will be periods where gold outshines other asset classes, but its inability to produce anything of value ultimately limits its value. Long-term investors are better off sticking with a diversified portfolio of stocks and bonds. 

1. Erb, C., and C. Harvey. 2013. “The Golden Dilemma.” Financial Analysts Journal, vol. 69, no. 4 (July/August): 10–42.

2. Source: Stock return from Morningstar Direct, based on the S&P 500 TR USD Index from 1/1/1975 to 7/27/2020 (annualized). Gold return from the St. Louis Fed’s FRED database, based on GOLDPMGBD228NLBM, 1/1/1975 to 7/27/2020 (annualized).

3. Source: Stock return from Morningstar Direct, based on the MSCI EAFE NR Index from 1/1/1975 to 7/27/2020 (annualized). Gold return from the St. Louis Fed’s FRED database, based on GOLDPMGBD228NLBM, 1/1/1975 to 7/27/2020 (annualized).

4. Source: Morningstar Direct. Correlation based on monthly data over the last ten years ending 6/30/20. Stocks represented by the S&P 500 TR USD Index, gold represented by the SPDR Gold Trust (GLD).

5. Source: Morningstar Direct. Correlation based on monthly data over the last ten years ending 6/30/20. Stocks represented by the S&P 500 TR USD Index, Treasury bonds represented by the BBGBarc 3-7 Year Treasury Index.

WEEK IN REVIEW

  • Data published yesterday showed that orders for durable goods lasting at least three years saw a strong increase for the second straight month. Orders for new cars and trucks, in particular, increased rapidly (+86%), while aircraft manufacturers posted a large decline. Core orders excluding defense and transportation, a key measure of business investment, increased at 3.3% versus the forecast 2.0%. While this was the second consecutive increase in the orders data, there are concerns that the resurgence in COVID-19 cases could taper further improvement.
  • Coming into this week, 26% of the companies in the S&P 500 have reported earnings. The blended earnings growth rate for companies that have reported, combined with the estimates for companies that have not yet reported, has improved to -42.4% (vs. -44.0% last week). A handful of tech giants, including Apple, Amazon and Google, are set to report after the market closes on Thursday. These firms have rallied on the basis that their businesses can continue to thrive in the midst of the pandemic. Their reports will need to justify those gains.
  • The Federal Reserve’s Federal Open Market Committee (FOMC) will conclude its monetary policy meeting on Wednesday. At 1 CT, the committee will publish its post-meeting statement, followed by a press conference with Chairmen Jerome Powell at around 1:30 CT (which can be live-streamed on Yahoo Finance). While the market is not expecting any changes to the policy stance, the Fed announced today that they will extend the current lending programs through December (they were originally scheduled to expire in September). In other interest rate news, the national average 30 year fixed mortgage rate hit an all-time low of 2.98% as of July 16th. 

HOT READS

Markets

  • U.S. Manufacturing Sector Regaining Momentum, But Surging Virus Cases Threaten Recovery (CNBC)
  • The Tech Bubble Is Slowly Deflating as Earnings Roll In. Here’s Why. (Barron’s)

Investing

  • The Difficulty of Timing the Market (Kenneth French) Comparing market timing to sports betting (video)
  • Flowmageddon: It Time Yet? (Morningstar) Active equity funds are seeing massive outflows

Other

  • The Trouble With TikTok on U.S. Phones (WSJ) Video
  • Inside the World of Black Market Bourbon (Whiskey Advocate)

ECONOMIC CALENDAR

Source: MarketWatch

MARKETS AT A GLANCE

Source: Morningstar Direct.

Source: Morningstar Direct.

Source: Treasury.gov

Source: Treasury.gov

Source: FRED Database & ICE Benchmark Administration Limited (IBA)

Source: FRED Database & ICE Benchmark Administration Limited (IBA)

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ABOUT THE AUTHOR

402.763.2967

jjenkins@lutz.us

LINKEDIN

JOSH JENKINS, CFA + SENIOR PORTFOLIO MANAGER & HEAD OF RESEARCH

Josh Jenkins is a Senior Portfolio Manager & Head of Research at Lutz Financial with over nine years of investment experience. He is responsible for assisting clients in the construction, selection, and risk assessment of their investment portfolios. In addition, Josh will provide on-going research and trade support.

AREAS OF FOCUS
  • Asset Allocation & Portfolio Management
  • Investment & Market Research
  • Trading
AFFILIATIONS AND CREDENTIALS
  • Chartered Financial Analyst (CFA)
  • Chartered Financial Analyst Institute, Member
  • Chartered Financial Analyst Society of Nebraska, Member
EDUCATIONAL BACKGROUND
  • BSBA, University of Nebraska, Lincoln, NE

P: 402.827.2300 | F: 402.827.2319 | E: contact@lutzfinancial.com | 13616 California Street | Suite 200 | Omaha, NE 68154

All content © 2017 Lutz Financial  | Important Disclosure Information |  Privacy Policy

FORM CRS RELATIONSHIP SUMMARY