Broker Check

September Newsletter


“…Lots of Ups and Downs.”

With each passing week we are still seeing the impacts of Covid-19 on our nation, but we are also seeing signs of economic improvement as parts of the Country continue to reopen and we get closer to a Virus vaccine which should have a positive impact on our economy.  Even after a successful vaccine is discovered, produced and distributed, it could still take several years for the US economy to fully recover from the recession brought on by COVID-19.  A “full recovery”, being defined by an unemployment rate close to four percent; many economists predict could take until 2023.

In August, we saw the US equities markets rise once again to all-time highs, which in effect makes February 10, 2020 through March 23, 2020, (with a 30 percent decline in the markets), the shortest bear market in history.  Stocks have staged a stunning turnaround since March, propelled by “Big Tech” as trillions of dollars in stimulus aid from the Federal Reserve helped prop up an American economy gripped by recession.  Accordingly, in our aggregate diversified portfolio we continue to take gains from the domestic equities category and reinvest those proceeds back into real assets and the income side of the portfolio.  Overall the aggregate portfolio remains defensively allocated as we anticipate much volatility for the foreseeable future.

Many Americans are increasingly concerned that there is a disconnect between equity market highs and the economy.  Although stocks are back to all-time highs, there are several million Americans struggling because they are still out of work.  There have been recent signs of improvement in the labor market, which has helped rejuvenate optimism for a recovery.  Market reaction is not so much about digesting all the good versus bad news; but perhaps more about whether things are getting better, versus worse in terms of recovery from the impacts of COVID-19.  The most recent jobs report shows the number of Americans seeking jobless benefits dropped below one million for the first time since the “Great American Shut Down” which began in the spring.  Improved consumer spending, a rebound in the housing market (July’s existing home sales rose nearly 25%) and better-than-expected corporate profits have added to investor optimism. 

High-flying technology stocks, which have a disproportionate effect on the S&P 500, have powered this year’s rally, far outpacing the rest of the equity markets as investors have bet heavily in the new stay-at-home economy.  A recent poll of CEOs from Fortune 500 companies found that 75 percent of companies believe that the pandemic will accelerate technological transformation which may result in increased technology spending and renewed economic growth.

Political risk is on its way and many investors fear the outcome of this year’s election.  You can be sure that the markets dislike uncertainty and each election brings plenty of uncertainty.  We expect short-term turmoil related to expectations of election results.

We have recently added a new alternative equity fund: Versus Capital Real Assets, for clients needing an additional allocation in this category.  This fund adds to our agricultural and timber real estate exposure, (think real assets).  It has a very stable valuation which receded less than six percent during the market declines seen earlier this year.  The fund also pays a predictable dividend which will bolster overall cash flows from the portfolio.  This new fund will be held long-term with quarterly redemption options available.  Please call us with any questions you might have concerning this fund.

TD Ameritrade will be sending you an updated disclosure statement with your August statement.  We want to draw your attention to two items in this disclosure that will impact many of our clients:

  1. For clients born on or after July 1, 1949, the age for starting required minimum distributions (RMDs) has been increased to 72
  2. RMDs, including those from Beneficiary IRAs, have been waived for 2020

We hope you all remain safe and well as summer fades to autumn.  As kids head back to school, we hold our collective breath hoping for some sense of normalcy and successful virus prevention.  The local school system has worked hard and seems to have a logical program for families to follow. 

With all the turmoil in the financial world right now, I know that a lot of people may be concerned about their investments.  If you know of someone who may need a fresh opinion about the changing investment scene, please have them call us to set up a consultation.  We are happy to give an educated second opinion on their investment portfolios and future goals to see if we could help them sleep better at night!


Intelligent Investment Management, LLP     

James Brost