Our team is pleased to welcome Tim Richmond, CPA to Valley National Financial Advisors in the full-time role of Tax Preparer.
Tim joins VNFA with 15 years of tax and accounting experience. He has a master’s degree in Business Intelligence from Saint Joseph’s University and a Bachelor of Science in Accounting and Economics/Finance from Muhlenberg College.
Tim will work as part of the VNFA Tax Department headquartered in Bethlehem. He will begin his work with VNFA remote as our offices remain closed during the COVID-19 pandemic.
by William
Henderson, Vice President / Head of Investments
Is it really possible that we are taking out two unknowns in one week? Joe
Biden wins the Presidency and Pfizer announces a COVID-19 vaccine that is 90%
effective in trials. Wow! We are left with the recession and its recovery
and social unrest as our remaining unknown events in 2020. Last week, we
saw impressive returns in the markets with all three major indices trading up
on the week. The Dow Jones Industrial Average gained +6.9%, the S&P
500 Index gained +7.3% and the NASDAQ gained +9.0%; putting their year-to-date
returns respectively at: -0.75%, +8.6%, and +32.6%; proving once again that
patience, long-term horizons and a sound financial plan are important.
Looking forward, we will most likely have a divided government and a strengthening economy as our tailwinds for the close of 2020 and even into 2021. Add to that a vaccine for COVID-19 that is 90% effective in clinical trials, continued monetary and potential fiscal stimulus and you see why the markets are rallying so strongly already this week. Last week, Federal Reserve policymakers met on Wednesday and Thursday but announced no changes in monetary policy. In fact, the Fed’s post-meeting statement noted that the COVID-19 pandemic continues to meaningfully weigh on economic growth. Fed Chair Jerome Powell stated that the central bank still has monetary tools it can deploy to stimulate the economy, if needed. That said, the economy continued to add jobs at a better-than-expected pace with 638,000 new jobs added in October 2020; driving down the unemployment rate to 6.9% vs. 7.9% in September. The Fed was basing their statements and outlook on last week’s data and last week’s more or less global spike in COVID-19 cases.
This week, Pfizer announced promising news about a potential vaccine for COVD-19. The market is seeing beyond the unknowns and is perhaps more efficient than investors realize. Although the presidential race is all but decided, a divided government remains a distinct possibility. The amount and timing of additional fiscal stimulus is still uncertain, what remains a certainty is the Fed keeping interest rates at near zero and with more arrows in their policy quiver.
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.
MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.
US ECONOMY
CONSUMER HEALTH
NEGATIVE
GDP increased at a 33.1% annualized pace in Q3. The U.S. economy has now recovered about 2/3 of its lost output owed to the COVID-19 pandemic.
CORPORATE EARNINGS
VERY NEGATIVE
With 90% of S&P 500 constituents having reported Q3 results, earnings are down 7-8% from the year-ago period. This compares to Q2 2020, in which S&P 500 earnings were down by 1/3 from the comparable 2019 quarter.
EMPLOYMENT
VERY NEGATIVE
As of October’s end, the U.S. unemployment rate stood at 6.9%, well below where most expected the metric to be at this point some months ago. However, with Covid-19 cases surging, the risk of a lockdown is elevated, which would likely cause an increase in the jobless rate.
INFLATION
POSITIVE
The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY
VERY POSITIVE
A second major COVID-19 stimulus bill is likely to be passed over the coming months.
MONETARY POLICY
VERY POSITIVE
The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to Covid-19. The Fed is prioritizing a recovery in economic output over the curtailing of potential inflation, which is an accommodative stance.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS
VERY NEGATIVE
The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.
ECONOMIC RISKS
VERY NEGATIVE
The impacts from Covid-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, and economic metrics improved in Q3 over Q2, however, economic activity remains well-below that in 2019.
The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.
“What we really want to do is what we are really meant to do. When we do what we are meant to do, money come to us, we feel useful, and the work we do feels like play to us.” – Julia Cameron
Laurie
can take your questions live on the air at 610-758-8810, or address those
submitted via yourfinancialchoices.com.
Recordings of past
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