Data Update, August 14, 2020 – Corona Virus and The Bear

Data Update, August 14, 2020

Coronavirus Data and the Bear Market

Today is our data update for August 14, 2020.  We share some data about the Coronavirus provided by First Trust Portfolios.  And we also provide an update on the Bear Market.

Covid-19 data update

This data sheet is provided by our friends at First Trust Portfolios.  It shows a variety of key data points about the pandemic in our country.  If you would like to download a pdf file of this, please click on the button.

Here are our key takeaways from this week’s virus data.

  • The trend of new cases flattened in the last week and began to show a slight uptick.
  • Two more vaccines entered phase 3 trials (up from 6 last week), and one more vaccine was granted approval for limited use. 
  • The “deaths per 1 million people” data is new this week.  

An article this week discussed the decreasing number of tests being conducted which will have some impact on the numbers. 

The 2020 bear market update: almost over...

Data Update august 14 2020
Click to enlarge

So close.

For a brief moment, the S&P 500 Index flirted with a new all-time high.  Here are the relevant points in this Bear Market.

  • From February 19 to March 23, the index fell 33.9%. (It was the fastest drop of that magnitude, ever!)
  • Since then, the index has recovered more than 50% of the loss.  
  • At the market’s close on August 13, the market was less than 0.5% away from setting a new high.

We will have more thoughts on this in the coming weeks. 

Have a great weekend!

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Financial Planning

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Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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June 2020 Client Letter: Investment Math

June 2020 Client Letter: Investment Math

Investment math can be complex. If a stock dropped 10% this quarter and gained 10% the next, you might think you have recovered the loss. Unfortunately, you are still down 1%. To recover the loss, the stock has to increase 11%.

The bigger the decrease, the more it takes to recover. A 20% loss means you need to earn 25% to break even. If you lose 35%, you’ll need to make 54% to erase the red ink. A 57% drop like we saw during the great recession requires a whopping 132% increase to completely recover.

Investment math isn’t addition and subtraction. It’s multiplication.

Investment Math

The 2020 Bear Market

From February 19 to March 23, the stock market dropped 34%. In the 99 days that followed, it gained over 38.6%! It didn’t erase all the losses, but it was a strong start.

Investment Math

Download Now: Investment Math

Download a pdf copy of our June Newsletter.  In this issue we cover:

  • Investment Math
  • Some RMD Relief
  • An above the line tax deduction for charitable contributions.

Panic Selling

In mid-June, Fidelity made a shocking announcement. Earlier this year, one-third of all their account holders, age 65 and older, sold all their stock positions. Nearly one out of every six account holders—regardless of age—sold all their stock positions.

It is possible a few sold before the market crashed. But remember, we went from an all-time high to 34% lower in 33 days. More than likely, most of those sales happened after the damage began.

Sitting on the sidelines means the investors who sold missed the incredible gains. They wanted to limit further damage, but doing so limited their ability to recover. Remember the investment math. If your account drops 20%, you need to earn 25% to break even. Those who sold their stocks will have trouble doing that in a money market fund or CD.

Bear markets are extremely unpleasant. But when they happen, one of the worst things you can do is move to the sidelines. Bottoms happen without notice. Often times the first few months after produce incredible gains. Missing those gains makes recovering the losses difficult at best.

Investment math

What's Next

Uncertainty remains a common theme. The coronavirus is still a part of the story, and it looks like it will be for the foreseeable future. An ugly and intense election season will start soon. Being a patient and disciplined investor is an ongoing challenge.

Over the long term, we remain optimistic. We believe the great businesses will continue to not just survive, but thrive. But in the short term, anything is possible. The next several months could be a very bumpy ride.

Ask A CFP Pro

Judging by the data, our ask a CFP pro show has been very popular.  We need your help to keep it going.  Click the picture below to send us a question.  We’ll answer it on an upcoming show.

Investment Math

Ask A CFP Pro

Judging by the data, our ask a CFP pro show has been very popular.  We need your help to keep it going.  Click the picture below to send us a question.  We’ll answer it on an upcoming show. math Investment
Investment Math

 

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Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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Things continue to improve…

Things continue to improve

The pandemic shut down our economy earlier this year. Now America is slowly reopening. Here are some charts and data showing that things continue to improve.

From Liz Ann Sonders of Charles Scwaab…

From economist, Scott Grannis….

Airline passengers

things are continuing to imrpove

Gasoline Sales

things are cointuing to improve &nbsp

Service Sector Activity

things continue to improve Scott Grannis writes an outstanding blog, he uses a very data driven approach.  Check it out here.

From Economist Brian Wesbury of First Trust Portfolios…

 

Retail sales and food services

 
things are starting to improve

 

 

Industrial Production and Manufacturing Output

things are starting to improve

Mr. Wesbury also believes the recession is over. Read more here.

From Thomas Lee of fundstrat.com

And although this tweet is a little older, I still thought this was very interesting.      

There are still risks...

There are still risks ahead.  The pandemic isn’t over, and the risk of a second wave of infections remains a threat.  But every now and then, it is important to look past the bad news that dominates the media.  While we aren’t back to normal, things continue to improve.

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Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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3 Questions To Help Evaluate Your Cash Flow

3 Questions to Help You Evaluate Your Cash Flow

The COVID-19 Pandemic forced a lot of major changes to our lives. IT has also created a unique opportunity to gauge how we spend money. Today, we’ll pose three questions to help you evaluate your cash flow.

Watch Now: 3 Questions to Help You Evaluate Your Cash Flow

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Questions To help Evaluate Your Cash Flow
3 Questions to Evaluate Your Cash Flow

A week ago, we talked about the importance of building your financial safety net. One of the first steps was to take a hard look at your spending. Today, we have three questions to help you evaluate your cash flow.

Question 1

Evaluate Your Cash flow

The things you really enjoyed—the activities that added value to your life, you’ll find a way to do them again. Eliminating the ones you don’t miss and the costs associated with them, can help you get your budget back on track.

Question 2

Questions to Help Evaluate Cash Flow

Was it that fancy cup of coffee, or breakfast sandwich on the way to work? Could it be something bigger? If you haven’t missed it when you were forced to stop buying it, you don’t have to start just because you can. You may find that many of those little things can add up to a lot of money each month.

Question 3

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When things get tight, we start to look at the details. It’s easy to identify the line-items on your bank statement that cause you stress. It could be the amount you spend eating out. Or, that pesky gym membership you don’t need or use. And then there are all those subscriptions. It could be something even bigger like a car payment.

Weigh the stress of those expenses now that times are tight to see the true value they provide to your life. If those two things are “out of balance,” take some time to clean them up.

Remember, there are no wrong answers to those three questions.

This pandemic forced us to alter our spending habits. In the process, it revealed what was essential, important, and truly valuable to our lives. And that can help us make better choices about money going forward. It can help us build our financial safety net and save for our future.

evaluate your cash flow questions
evaluate your cash flow questions
Questions to Evaluate Your Cash Flow

 

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Financial Planning

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Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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Creating Your Financial Safety Net

Creating Your Financial Safety Net

As America begins to reopen, we can set our sights on what we need to do to get our financial situation back in order. What should be at the top of your list? In my mind, creating your financial safety net should be a high priority.

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Create Your Financial Safety Net

Some Disturbing Numbers

America is starting to reopen. Hopefully that means we will all be able to get back to work soon and begin your own financial recovery. But as you begin to focus on what you need to do, what should be your top priority?

The best place to start: your financial safety net. By this we mean focus on building a cash reserve and eliminating debt.

When we look at the some of the numbers we see some very disturbing statistics.

Lack of Savings…

According to gobankingrates.com:

  • Over 2/3 of Americans don’t have $1,000 in a savings account.
  • 45% have no savings at all.

Massive Consumer Debt…

According to NerdWallet, Americans owe more than $14 trillion
  • $466 billion in credit card debt
  • $9.5 trillion in mortgage debt
  • $1.3 trillion in car loans
  • $1.5 trillion in student loans

The “Average American” has no safety net!

Financial Safety Net

A Major Financial Crisis

When 30 million people lose their jobs, and millions more see their pay reduced, it is going to cause real problems very quickly.  This time, the government stepped in to provide some relief.  Many banks and lenders have been very understanding too.  But the next time you face a financial crisis, you may not be able to depend on the same measures.

Having cash allows us to keep the lights on, food on the table, and a roof over our heads.

Eliminating debt means we have less money going out each month. And this means the money we do have can go for what we truly need.

How Do You Do This?

We need to focus on how to avoid these problems if or when there is a “next time.”

How do you do this?  It’s simple, but not necessarily easy.

1. Take a hard look at how you spend money.

The past few months should have revealed what expenses are truly essential.  You will need to make some hard choices and big changes in the expenditures that aren’t.

2. Make saving a higher priority.

As things return to normal, make it a point to save something from each paycheck.  Aim to have at least $1,000 in a savings account to start.

3. Create a plan to eliminate your debt.

Focus on your car loans, your credit cards, and student loans.  One of the best ways to do this is to use the debt snowball created by radio personality, Dave Ramsey.

Your Financial Safety Net

Be ready for the "next time"

We don’t know when the next financial crisis will happen, and it may only be YOUR financial crisis.  Your financial safety net will mean a whole lot less stress and a lot less pain.

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Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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4 Ways The Pandemic Could Impact Social Security

4 Ways the Pandemic Could Impact Social Security

Social Security is the cornerstone of retirement income for many Americans.  Have you wondered if the Coronavirus outbreak will impact your benefits? Here are four ways the pandemic could impact Social Security.

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The Covid-19 Pandemic and the Economy

The Covid-19 virus has turned the world and the economy on its head. The financial impacts are being felt far and wide. We have record unemployment claims, with nearly 22 million people out of work–so far. And Pew Research estimates 27% of American workers have seen their pay reduced.  Government response has also been extreme.  All of that will impact the future.

Most of the media focus has been on how this outbreak has impacted current workers. But it can also affect retirees. Here are four ways the pandemic could impact your Social Security benefits.

pandemic social security impact

Social Security does provide an inflation-adjusted income stream. But over the past several years those average increases have not been all that great. In some years, it hasn’t been enough to cover the increase in Medicare premiums. 

According to the Federal Reserve Bank of Cleveland, the current 10-year inflation expectation is less than 1.2% per year. If those projections hold, it means small benefit increases. In some years, it could mean your net check decreases due to rising Medicare costs.

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Pandemic Impacts Social Security

Depending on how long the economic shutdown lasts, many older workers could be forced to retire earlier than they expected. For many, this forces them to start Social Security earlier than their normal retirement age. And those discounts could be close to 30%.  

Social Security Impact pandemic

Social Security uses Average Indexed Wages to compute your Social Security benefits. The economic downturn means total wages earned in 2020 will be less. They could be a lot less.

This could impact how they compute your Social Security benefits. The end-result could be a smaller monthly payment. This will most likely impact those who are close to age 60.

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If you are 50 or older, and thinking about your retirement, click here for a free retirement assessment.

Pandemic Impacts Social Security

Right now, fewer payroll taxes are being collected. This places an extra strain on an already stressed system.

Prior to the pandemic, Social Security looked to be solvent until 2034. This means they had enough to pay the promised benefits. But the reduced tax collections could mean the problems could happen a year sooner.

Unless there are major changes, when Social Security reaches this point, benefits will have to be reduced.

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Far Reaching Impact

The coronavirus pandemic has affected more than our health. It has had a significant impact on many areas of our economy. And this includes your Social Security benefits.

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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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