What Does the CARES Act Mean for You?

As we continue to navigate this ever-changing environment, we wanted to provide you with some updates regarding your accounts with us here at TRUE.

On the asset management front, we executed our quarterly rebalance last week and took advantage of the late-week market pull-back. We made a few tactical changes to each portfolio, which we would be happy to discuss with you individually if you have questions. The Gescher Herber Group maintains our belief that the US had a strong economy going into this season and will have the financial wherewithal and horsepower to recover quickly. 

Although the unemployment claims reported yesterday, April 2, 2020, were shocking and well in excess of the highest estimates, the market moved in a positive direction. At this point we anticipate there will be more headlines and more volatility to come, but only time will tell. As we all know, the longer this economic shutdown continues, the more the economy will be affected. As information is disseminated, we are prepared to act accordingly, and as always, we will keep you informed. 

On Friday, March 27th, President Trump signed into law the CARES Act (Coronavirus Aid, Relief, and Economic Security Act). There are a few provisions of this bill that will affect retirement accounts, but these details are still being ironed out. Here is what we know so far:

• 2020 RMDs can be waived for all retirement accounts, including Inherited IRA/BDA accounts

• If you have already taken a 2020 RMD within the last 60 days, we can reverse withheld taxes and return your distribution to your IRA if you choose. Unfortunately, this does not apply for Inherited IRA RMDs. 

• QUALIFIED Coronavirus related distributions from your IRA will not be charged the 10% penalty tax for those under 59.5 years of age. We strongly suggest you discuss any possible distributions with us and/or your tax advisor to ensure the proper reporting is done to avoid any penalties.

Please let us know as soon as possible if you would like to reverse your Q1 2020 IRA distribution or stop any future 2020 distributions from your IRA.

Finally, the IRS has postponed the 2019 tax filing deadline to July 15th. As part of this extension, the 2019 IRA and HSA contribution deadlines have also been moved to July 15th. All 2019 contributions must be postmarked to Fidelity prior to this new deadline. As a reminder, the maximum contribution for those under 50 years of age is $6000, and $7,000 for those aged 50 and above. Health Savings Accounts can now be opened at Fidelity, with an annual contribution limit of $3,500, or $4,500 for those above the age of 55.

Our best to you and your families during this time. We hope you are staying safe, sane, and healthy.

Todd, Jason & Rachel

Students of the Market

Over the last few weeks we have seen extreme market volatility and compelling news headlines. Attached is a short, two page presentation showing the 15 worst historic periods for the S&P 500, as well as the returns 1 year later. Although we acknowledge these are unpredictable, unprecedented times, the market has always bounced back, and we are each confident that this will be no different. We have been making proactive purchases and taking advantage of what will likely be considered a great buying opportunity. 

If the Governor of Oregon mandates a Shelter-in-Place or Stay-Home Order, Todd, Jason and Rachel each have work stations at home and will be able to conduct business uninterrupted. We also will have the ability to forward calls coming into our office to a designated line at each of our homes. 

As always, please reach out with any questions or concerns.

Be Well,

Todd, Jason & Rachel

Black Swan

An unpredictable or unforeseen event, typically one with extreme consequences.

The market sell-off of the past few weeks, sparked mainly by the Corona Virus, has tested the most disciplined of investors’ resolve to stay the course.  We have been following the latest developments about the Virus to ensure we are doing our part to ensure the safety of our clients and employees.  Of course, we are also monitoring market response to this Black Swan event to ensure our strategies continue to make sense.   Rather than trying to rehash news reports or offer some novel advice about the Virus, instead we thought it useful to put the current environment in perspective.

The sell-off has been fast and violent.  On February 19, only fifteen trading days ago, the S&P 500 hit an all time high.  As of this writing, the index is off over -26% from recent highs.  Diversified client portfolios have held up far better than the indices, as holdings in high quality fixed income and alternatives have offset the steep losses in stocks.  As you know, we follow a quantitative discipline that guides our buy and sell decisions – and we continue to have conviction in our process for the core of our portfolios.  With that said, the abrupt and violent nature of the sell-off will likely provide opportunities due to market dislocations that we are preparing to take advantage of.

The current environment reminds us most of the Crash of October 1987.   The economic backdrop at that time was generally strong, much like now.  By April, six months after the roughly 28% drop, the market had rallied back 20%.  We don’t know what will happen this time, or how much further things might fall, but we do believe the comparison is relevant.  

Compare our situation now to the Financial Crisis of ’07-’08.  It is not an exaggeration to say the US banking system was a few days away from failing…that bears repeating, the banking system was failing!  From the collapse of Lehman Brothers to the bottom was just over a 30% decline.   The real estate market was in an historic bubble and derivatives worsened the problems.  To compare the Corona Virus to the Financial Crisis seems far-fetched.  To be clear, there will absolutely be significant economic fall-out.  Corporate earnings are likely to be very weak and we think it is likely that this will push the US economy into a recession.  However, the nature of this “market event” is that it is temporary.  Central bankers around the globe are acutely tuned in to what is happening and have indicated they will provide what ever means is necessary to get markets and economies through this.  Many economists believe we will enter a recession in the next few months but by the end of the year the economy is likely to be growing again.

We continue to be proactive in our outreach to clients. If you are feeling particularly unsettled, please do not hesitate to call.  If you are feeling like you want to take advantage of these lower prices, don’t hesitate to call. 

As always, we will stay disciplined to our long-term process while attempting to tactically take advantage of opportunities.

Stay well!

Todd, Jason & Rachel

Time to Fear the Coronavirus?

Over the past two weeks we have seen volatility within the markets as a result of the Coronavirus Outbreak. Market volatility is not only common but is expected in our industry, and it always will be. Having a strategy in place is essential. We have been closely monitoring our “Volatility Reduction Strategy” (VRS) indicators as always, and they are still positive. This being said, the current course of action is no action. If we see the economy or other factors dictate a move we are ready to act, but for now we maintain confidence in our strategy and continue to stress the importance of keeping a long-term objective. If anything, this pullback may provide a buying opportunity.

We wanted to share an article we consider to be a (quick) worth-while read. If you have any questions or concerns, we are more than happy to talk.

First Trust Economic Research Report: Time to Fear the Coronavirus?

Have a wonderful day,

Todd, Jason & Rachel

Handling Market Volatility

With all the uncertainty we see surrounding trade wars, trade treaties, the Federal Reserve and interest rates, along with slowing economies in Europe, there has been a disruption to the markets since the beginning of October. We feel it is important to communicate with our clients about these events. The US stock markets have not experienced a significant correction in quite some time, and healthy markets usually take a pause and correct to the tune of about 10% annually. We are seeing signs of a slowing, yet still healthy economy, with no recession in sight. Our “Volatility Reduction Strategy” (VRS) indicators turned negative for the S&P 500 as well as other major indexes we follow last week and we acted. For accounts in our managed platforms, and for the single fund solutions in your accounts, equities/stock market exposure has been reduced across all of the Gescher Herber Portfolios and Russell Model Strategies. If the economy or other factors dictate another move either positive or negatively, we are ready to act.

We now take this moment to relax and enjoy the season. Your relationships are special to our team, and we wish the best to you and your families during this time of year.

Merry Christmas !

The Gescher Herber Group

Todd, Jason, Deb and Rachel