Posts made in April 2020

The Week on Wall Street
Stock prices bounced around last week as investors reacted to wild swings in the price of oil and reports that called into question the efficacy of two potential virus treatments.

The Dow Jones Industrial Average retreated 1.93%, while the Standard & Poor’s 500 lost 1.32%. The Nasdaq Composite Index slipped 0.18%. The MSCI EAFE Index, which tracks developed overseas stock markets, declined 1.21%.[1][2][3]

Oil Wavers, Promising Virus Treatments Disappoint
Stocks opened the new week lower on the heels of a plunge in oil prices that saw the May oil futures contract fall into negative territory. While negative prices were largely reflective of technical issues associated with trading the contracts rather than the actual price of oil, the unprecedented move unsettled investors.

Stocks found some positive momentum as the week wore on, buoyed by corporate earnings reports that showed solid performance amid a challenging environment.

On two separate days, however, solid moves to the upside were derailed by disappointing news on promising COVID-19 treatments. One drug failed to produce positive results in its first trial, followed the next day by an FDA warning against taking chloroquine and hydroxychloroquine to treat COVID-19. Stocks managed to rally and trim the week’s losses during the market’s final hours on Friday.

The Economic Reopening Begins
States across the nation, including Georgia, Tennessee, South Carolina, and Texas, have begun the process of slowly reopening commerce, while Montana’s governor announced the first phase of restarting its economy.[4][5]

Each state is taking a different approach, potentially serving as a laboratory to help guide other states in their efforts to reopen businesses. From the market’s perspective, these early steps are not only hopeful signs that the journey to normalization may have begun, but they may provide important clues to how quickly business activity can rebound and the degree to which individuals resume social engagement – two important metrics that may influence the market in the weeks ahead.

[1] The Wall Street Journal, April 24, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
[2] The Wall Street Journal, April 24, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
[3] The Wall Street Journal, April 24, 2020
[4] US News & World Report, April 21, 2020
[5] US News & World Report, April 22, 2020

If you or someone in your family is a member of the U.S. Armed Forces, you may be eligible for some important tax benefits. According to the IRS, military families may benefit from:

• Filing deadline extensions if you served in a combat zone or meet other requirements.
• Combat pay exclusions. Some forms of combat pay are not subject to income taxes.
• Expense deductions for moving, transitioning to civilian life, and traveling as a reservist.
• Free tax help on military bases.

For more information about filing taxes as a member of the U.S. Armed Forces, consult a tax professional in your area or refer to Publication 3, “Armed Forces’ Tax Guide.”

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[8]
[8] IRS.gov, April 14, 2020.

The Week on Wall Street
Stock prices pushed higher last week as news of a White House plan to reopen the economy and reports of a potential COVID-19 treatment helped the market overcome weak economic data and an ugly start to the corporate earnings season.

The Dow Jones Industrial Average rose 2.21%, while the Standard & Poor’s 500 advanced 3.04%. The Nasdaq Composite Index gained 6.09% for the week. The MSCI EAFE Index, which tracks developed overseas stock markets, slumped 1.75%.[1][2][3]

Reality Hits

Until last week, the extent of the economic damage from COVID-19 lacked a lot of hard data. With the release of retail sales (down 8.7% for March), industrial production (down 5.4% in March), and new jobless claims of 5.2 million (bringing the four-week total to 22 million), the scope of economic trouble became clearer.[4][5][6]

Stocks wavered throughout the week as investors digested the economic data and balanced the reports against signs that the pandemic may have peaked. With news of a plan to restart the economy and promising test results of a COVID-19 treatment, market sentiment turned positive, sending stocks higher on the final day of trading and cementing the second consecutive week of gains.

Corporate Earnings
Large banks kicked off the quarterly earnings season, reporting declines in profits as they hiked loan loss reserves and saw a contraction in consumer credit card use. The large loan loss reserves represent a sobering view on just how much the banks believe small businesses and consumers may be affected by the economic downturn.

Final Thought
With bank earnings reports, investors got an important – but limited – view of the state of the economy. This week’s earnings reports are expected to provide a much broader cross-section of the economy, with a number of consumer products, technology, indu

1] The Wall Street Journal, April 17, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
[2] The Wall Street Journal, April 17, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
[3] The Wall Street Journal, April 17, 2020
[4] The Wall Street Journal, April 15, 2020.
[5] MarketWatch, April 15, 2020.
[6] The Wall Street Journal, April 16, 2020

If you pay for childcare, so that you can work or look for a job, you may be able to deduct those expenses on your federal tax return. Here’s what the IRS wants you to know:

• You can only deduct expenses for the care of a qualifying dependent, such as a child under age 13.
• You must be paying for care that allows you or your spouse to work.
• Qualifying care includes home care, daycare, or a day camp. Overnight camps, summer school tutoring, or care by other dependents do not qualify.
• You must have earned income in the year that you incur childcare expenses. The expense limit is $3,000 for one qualifying dependent or $6,000 for two or more.

For more information about deductions for dependent care, visit IRS.gov or consult a qualified tax advisor.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[8]
[8] IRS.gov, January 30, 2020

The Week on Wall Street
The stock market staged a broad rally this week, buoyed by the prospect that COVID-19’s grip on the nation may be easing and news of another Federal Reserve program to help stabilize businesses.

The Dow Jones Industrial Average jumped 12.67%, while the Standard & Poor’s 500 climbed 12.10%. The Nasdaq Composite Index rose 10.59% for the week. The MSCI EAFE Index, which tracks developed overseas stock markets, advanced 6.32%.[1][2][3]

A Change in Sentiment
Market sentiment took a more hopeful turn on news of an apparent peaking of cases in Italy and New York State. Investors also welcomed comments by Dr. Anthony Fauci that the start of a turnaround in the outbreak is close at hand.

The S&P 500 Index surged 7.03% to start the week and added to gains as the week progressed. Positive trends in COVID-19 cases, an agreement between Russia and Saudi Arabia to cut oil production, and the Fed’s unveiling of a $2.5 trillion loan program to assist small and midsize businesses fueled the rally.[4][5]

Credit Markets Stabilize
As the economy shut down in March, credit markets began to exhibit deep stresses. A functional bond market is essential to economic and financial health, which is why the Federal Reserve initiated a number of actions aimed at helping them to operate.

Intervention by the Fed appears to have helped. A raft of new bond offerings may be signaling that investors are now willing to take on more risk. Last week, 11 investment-grade companies sold nearly $20 billion in bonds.[6]

A stable credit market helps the stock market, and while the bond market is not yet out of the woods, its improving health is a positive sign.

Final Thought
One of the major challenges for investors in the last month has been determining realistic stock valuations amid uncertainty over corporate earnings. With earnings season about to unfold, investors may be able to better gauge the impact of the pandemic on company profits. Investors will get to hear from corporate leaders about the state of their businesses and possibly their outlook for the next few quarters. This may help fill in the gap that currently exists but what remains uncertain is whether that information proves to be positive or negative for the market.

[1] The Wall Street Journal, April 9, 2020.
[2] The Wall Street Journal, April 9, 2020.
[3] The Wall Street Journal, April 9, 2020.
[4] CNBC, April 6, 2020.
[5] The Wall Street Journal, April 9, 2020.
[6] Bloomberg, April 6, 2020.

If your child or grandchild has recently secured employment, pass along these helpful tips from the IRS:

• Don’t be surprised when your paycheck is smaller than you expect. Employers withhold taxes and pay them directly to the IRS.

• Keep in mind that all tip income is taxable, and you must report tip income over $20 monthly to your employer.

• Even if you don’t earn enough from your first job to owe income taxes, your employer must withhold Medicare and Social Security taxes from your paychecks.

• Any money you earn from working for others is taxable. If you mow lawns, babysit, or earn money outside a regular job, you may be considered self-employed by the IRS.

• Speak to your employer about whether they will be reporting your wages to the IRS. If you have questions, ask your parents or grandparents to put you in touch with a tax expert.
For more information about tax rules for first-time jobholders, visit IRS.gov or consult a qualified tax advisor.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[6]
[6] IRS.gov, May 20, 2019.

The Week on Wall Street
Modest declines in stock prices this week masked the volatile inter- and intraday price swings as investors digested poor economic data and a warning from the president that the worst days of the COVID-19 pandemic may still lie ahead. The Dow Jones Industrial Average slipped 2.70%, while the Standard & Poor’s 500 dropped 2.08%. The Nasdaq Composite Index declined 1.72%. The MSCI EAFE Index, which tracks developed overseas stock markets, slid 2.76%.[1][2][3]

The Quarter in Brief
The spread of COVID-19 sent stocks tumbling in the first quarter as health and economic costs of the pandemic began to mount. Stocks remained under pressure, despite the Federal Reserve’s lowering of short-term interest rates and the government’s stimulus efforts through the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act. The DJIA sank 23.2% and the S&P 500 dropped 20% on the quarter. The COVID-19-related volatility in the market has left all but a handful of sectors in a prolonged period of uncertainty. With millions of Americans staying at home in an effort to “flatten the curve” of COVID-19’s impact on people, businesses are coping with closing for the duration, altering practices, or facing staffing issues.[4]

Oil Turbulence
The oil market dominated the commodities headlines during the first quarter. The failure of Russia to join Saudi Arabia in supporting lower oil production targets left Saudi Arabia fuming and responding with an announcement of its intention to raise oil output. Oil prices plummeted on the news, contributing to the stock market’s woes. While lower oil prices represent a boon to consumers in the form of lower gasoline prices and a relief to companies with high energy consumption (e.g., airlines, chemical), they also pose a risk to the American energy industry.

Should low oil prices persist, it may lead to lower capital expenditures, labor force reductions, and troubles in the credit markets as less-capitalized companies struggle to meet their debt obligations. As the quarter came to a close, there was some speculation that President Trump would take a larger role in working with Russia and Saudi Arabia on production targets.

What’s Next
It is difficult to see, in the middle of the COVID-19 epidemic, exactly what the full impact will be. Suffice it to say, the cost in human terms has been staggering so far and seems certain to affect at least part of the coming quarter. As people and businesses adapt to extended periods of quarantine, the only thing that seems clear is that no aspect of American life will be unchanged. CARES Act stimulus checks are on the way for millions of Americans. The Federal Reserve has lowered interest rates. Further measures are being considered at the state and federal levels. The only two things that seem truly certain are that action is being taken and that we’ll all breathe a sigh of relief once this crisis subsides.

[1] The Wall Street Journal, April 3, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
[2] The Wall Street Journal, April 3, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
[3] The Wall Street Journal, April 3, 2020.
[4] CNN.com, March 31, 2020

As I’m sure you know, the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was recently signed into law. The CARES Act is designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees.[1]

To put this monumental legislation in perspective, Congress earmarked $800 billion for the Economic Stimulus Act of 2008 during the financial crisis.[1]

The CARES Act has far-reaching implications for many. Here are the most important provisions to keep in mind:

• Stimulus Check Details – Americans can expect a one-time direct payment of up to $1,200 for individuals (or $2,400 for married couples) with an additional $500 per child under age 17. These payments are based on the 2019 tax returns for those who have filed them and 2018 information if they have not. The amount is reduced if an individual makes more than $75,000 or a couple makes more than $150,000. Those who make more than $99,000 as an individual (or $198,000 as a couple) will not receive a payment.[1]

• Business Relief – The act also allocates $500 billion for loans, loan guarantees, or investments to businesses, states, and municipalities.[1]

• Inherited 401(k)s – People who have inherited 401(k)s or Individual Retirement Accounts can suspend distributions in 2020. Required distributions don’t apply to people with Roth IRAs; although, they do apply to investors who inherit Roth accounts. [2]

• Suspended RMD – The CARES Act suspends the minimum required distributions most people must take from 401(k)s and IRAs in 2020. In 2009, Congress passed a similar rule, which gave retirees some flexibility when considering distributions.[2,3]

• Withdrawal Penalties – Account owners can take a distribution of up to $100,000 from their retirement plan or IRA in 2020, without the 10-percent early withdrawal penalty that normally applies to money taken out before age 59½. But remember, you still owe the tax.[4]

Many businesses and individuals within our community are struggling with the new realities that COVID-19 has created. The CARES Act, however, may provide some much-needed relief for our neighbors, friends, and loved ones.

If you’d like to chat about how the CARES Act impacts you or to see if these special 2020 distribution rules are appropriate for your situation, give me a call or just hit reply.

Kind Regards,

R. Scott Ramsay
Ramsay Capital Group

[1] CNBC.com, March 25, 2020.
[2] The Wall Street Journal, March 25, 2020.
[3] The Wall Street Journal, March 25, 2020.
[4] The Wall Street Journal, March 25, 2020.

If you’re on the lookout for a new job, you might be able to deduct some search-related expenses on your taxes. Here’s what the IRS wants you to know:

• You can only deduct expenses for a job search relating to your current occupation. Unfortunately, you cannot deduct job search expenses if there is a “substantial break” between your last job and your job search or if you are looking for your first job.

• You cannot deduct expenses that are reimbursed by an employer or other party.

• You can deduct fees paid to employment and job placement agencies and the costs relating to preparing and mailing your résumé to prospective employers, including professional proofing and editing.

• If you travel to an interview or another search-related activity, you can deduct those expenses, but only if the primary purpose of the trip is to look for work.

• Job search expenses will usually be claimed as a miscellaneous item deduction, and you can only deduct the portion of miscellaneous deductions that exceed 2% of your adjusted gross income.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[8]
[8] IRS.gov, August 25, 2017

An open-ended commitment by the Federal Reserve to support American businesses and capital markets along with the passage of a $2 trillion aid package improved investor sentiment and drove a strong rally in stock prices.

The Dow Jones Industrial Average jumped 12.84%, while the Standard & Poor’s 500 gained 10.26%. The Nasdaq Composite index rose 9.05% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, increased by 12.03%.[1][2][3]

Stocks Rebound
A stunning string of Federal Reserve initiatives and the passage of a $2 trillion aid bill buoyed stocks this week, with the Dow Jones Industrial Average jumping by over 11% on Tuesday, its best day since 1933. Stocks continued to strengthen the following day, registering their first back-to-back gains since February.[4][5]

Despite a record 3.28 million jobless claims, stocks added to their gains for a third straight day. Stocks gave back some gains on the final day of trading to end an otherwise welcomed week of positive price action.[6]

A Shift in the Conversation
The conversation around the domestic spread of the coronavirus has been centered on “flattening the curve,” with closures of local businesses and schools, a shift to working from home, and appeals for social distancing.

Hitting the pause button on the U.S. economy, however, has had its consequences, including massive job losses, sharp declines in business revenues, and disarray in the capital markets. This week the conversation shifted to include how to restart the economy amid a pandemic that may not have yet peaked.

Final Thought
On a strictly definitional basis, the three-day surge in stock indices this week signaled a new bull market (when stocks rise 20% after having fallen 20% or more). But it’s hard for even professional investors to make sense of a market that enters a bear market and a bull market in the same month. This volatility certainly speaks to the deep health and economic uncertainties that exist.

It’s not clear what the rally this past week means for the market going forward. Absent such clarity, markets are likely to remain volatile in the near term, requiring investors to be patient with their long-term investments and wait as calmly as possible for time to answer the big questions overhanging today’s market.

[1] The Wall Street Journal, March 27, 2020.
[2] The Wall Street Journal, March 27, 2020.
[3] The Wall Street Journal, March 27, 2020.
[4] CNBC.com, March 23, 2020.
[5] The Wall Street Journal, March 25, 2020.
[6] The Wall Street Journal, March 26, 2020.