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All Domani Wealth offices will be closed on Tuesday, September 24, 2019 for employees and their families to enjoy a special Appreciation Event in recognition of the team’s work and dedication to providing quality service to clients throughout the year. If you have an urgent matter and need immediate assistance on this day, please contact your advisor on their cell phone.

We appreciate your understanding.

A Season of Upheaval – Commentary on 2020

Post Written by: Angela R. Berkosky, CFA | Thomas K. Williams, CFP®, CPA

Politics, a struggling economy, a global pandemic, and natural disasters: Commentary on 2020 – How you can stay the course with your finances during this tumultuous time?

You will not hear the words “2020” and “smooth” in the same sentence.

This year has been nothing but a roller coaster ride. From navigating a global healthcare pandemic, the likes of which haven’t been seen in a century, to closely following a race to develop a vaccine, and then to managing the constant revelations during a presidential election. On top of all that, the stock market has been volatile.

The result of this ongoing, constantly changing information is that it makes us feel very nervous about what’s going to happen in the future. And not just related to one of those areas – election, more waves of infections as winter arrives – but also, with our own lives. How will the markets affect my finances? Will I be able to rely on the income I have right now in retirement? For pre-retirees, will I be ready for retirement after a year like this?

We are with you in this time, and we want to offer some commentary on 2020 and thoughts on the current state of the world, and how it relates to financial markets.

Elections

Commentary on 2020 would not be complete without talking about the election. Historically, election results contribute to only short-term volatility. There is no real correlation between a presidential election outcome and the returns of the stock market. Many other factors have a longer-term impact on the capital markets, such as corporate earnings, economic growth, investor emotions/behaviors, geopolitical events, etc.

We will always have some volatility in the capital markets, simply because many different world and national events affect them. Trying to time the market to avoid volatility can be a losing game.  Not only must investors determine when to exit the stock market, but also when to buy back into the market.

It is also nearly impossible to forecast who will win the presidential election. Over the longer term, markets typically perform well regardless of which political party occupies the White House or has majorities in Congress. Capital markets and economic growth tend to increase over time, in spite of interim volatility.

Source: Yale & Robert Shiller Online Database, US Bureau of Labor Statistics

Keeping your focus on your long-term goals with a long-term view, is critical to reaching your financial goals. The impact of lost returns due to trying to time the market during or after an election can be a huge stumbling block in reaching your longer-term financial goals.

Pandemic

A recent example of trying to time the market occurred earlier this year when COVID-19 began to create much volatility while the disease began to steadily spread in the U.S. As the markets began falling, many investors panicked and sold out of their equity holdings.

If you as an investor would have exited the market on March 13 of 2020, the day President Trump declared COVID-19 a national emergency, you would have locked in negative returns of -15.7 percent for 2020, based on the S&P 500 Index.*

However, an investor who remained fully invested throughout 2020 would have realized returns of more than 5.6 percent year-to-date through September 30, based on the same index.**

Tax Planning

In 2020, tax planning has been of paramount importance. As the possibility for a shift to Democratic leadership on the national stage may occur both in the White House and in the Senate, the possibility also exists that leadership may increase both income and estate taxes.

However, regardless of which party prevails in leadership during the 2020 election, taxes are likely to increase over the next few years, in part to manage the extraordinary government spending that has taken place this year to help businesses and individuals navigate the economic shortfall from managing the pandemic.

In a few weeks, you may find your tax accountant and/or tax attorney is swamped with clients rushing to complete tax planning steps and finalize documents by year end. It is wise to get in touch with your tax planner now to have thoughtful discussions on your goals and avoid a last-minute rush. Domani Wealth is here to help you think through the impact of increased volatility in your portfolio, evaluate the pathway to long-term goals, and advise on possible tax changes in the future. We can also help coordinate appropriate meetings with your tax planning team.

End of Year

Wrapping up this commentary on 2020, as we continue marching toward the end of 2020 (thank goodness!), we encourage you to move forward with a sense of calm. While we may see some short-term market volatility because of these world-changing events, the market typically rewards investors with a long-term viewpoint. We’ll be by your side and help you to remain disciplined and focused as we navigate this season of upheaval together.

If you’d like to get in touch with us anytime, please reach out at 855-855-5455, or contact your advisor directly. If you’re looking for an advisor or would like a second opinion, we offer a no-obligation consultation conversation anytime, and you can contact us here.

 

*Year-to-date return through March 13, 2020 represents total return of the S&P 500 Index per Bloomberg for dates 12/31/2019 through 3/13/2020.

**Year-to-date return through September 30, 2020 represents total return of the S&P 500 Index per Bloomberg for dates 12/31/2019 through 9/30/2020.

 

Important Disclosure

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 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 article serves as the receipt of, or as a substitute for, personalized investment advice from Domani. A copy of Domani’s current written disclosure brochure discussing our advisory services and fees continues to remain available upon request.

PLEASE SEE ADDITIONAL IMPORTANT DISCLOSURE INFORMATION

 

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