It has been one year since the “lockdown” in 2020. We should feel the pain of those who have died, or those who have suffered, or those who have been out of work. In many ways, it has also been a remarkably positive twelve months. With the anticipation and arrival of the COVID vaccines, the US unemployment rate has gone from a high last April of 14%, decreasing to a current rate of 6%. Many schools are back in session. Many grandparents are hugging their grandchildren again. Travel is picking up. Life is not quite back to normal yet, but we are getting there. Oh, and the stock market, measured by the S&P 500, has risen 86%! The low point 2,231 occurred last March 23rd. This past Friday, the S&P closed at 4,180. That is the best 12-month performance in the history of the index!
From my vantage point, the reasons for the remarkable year-long gains in the equity markets can be attributable to four main factors: 1. Historically low interest rates, 2. Corporate earnings growth, 3. Employment recovery, and 4. Business leadership and ingenuity. Folks are able and willing to buy homes, cars, and computers at very low rates of interest. Companies like Amazon and Tesla innovate and make money for investors and workers. Restaurants and small businesses are reopening. The Walt Disney Company is a perfect example of business leadership and ingenuity. They closed their worldwide theme parks in April and took huge losses. Their stock price fell. Then they expanded their Marvel Comics enterprises, purchased Hulu and ESPN plus. They played “Hamilton” on their Disney + streaming service and jumped to 60 million subscribers. Their stock tumbled from $138 to $85 in late March. Today, it is $183.
The best investment sectors in 2021 have been Energy (+29%), Financials (+20%), Industrials (+14%), Materials (+14%) and Real Estate (+14%). Value has outperformed growth so far this year. A 10 Year Treasury earns a pitiful 1.59% while the average interest rate on a 30-year fixed mortgage is 3.27%.
Cryptocurrency has been an emerging market with vessels like Bitcoin being discussed more frequently in the news. With significant price volatility over the past several years, this sector comes with high risk. We can provide investments in cryptocurrency to supplement your portfolio. Please contact us to discuss the details.
The Required Minimum Distribution (RMD) is back in 2021. Suspended last year, everyone previously required to withdraw must restart in 2021 and complete distributions by December 31st. Under the new law, you do not need to begin distributions until age 72 if you had not already reached 70 ½ in 2020.
The tax return filing date has been extended to May 17th this year. Here are a few tax changes and legislation that might be of interest: Stimulus checks do not count as taxable income. Taxes are due on unemployment benefits if earnings exceeded $10,200. Deductions for working remotely cannot be taken if employer requested; home office write-offs are for self-employed. The child tax credit has been increased from $2000 to $3000 in 2021. Travel and medical expenses due to COVID are deductible if you itemize. Donations to non-profit organizations can be deducted up to 100% from the previous 60%. The 10% penalty for early retirement plan withdrawals was waived in 2020 for COVID-related reasons. Check with your accountant for the details.
If your semi-annual financial check-up with us is overdue, please contact Judy or Bobby to schedule a time.
Can this market sustain this history making growth? If you have a crystal ball or the tarot cards to make a prediction, you may want to keep it to yourself. Anyone who forecasted a big crash followed by a prolonged period of market negativity has been dead wrong! Staying with good investments during this last year and adding to them has proven very profitable for investors. American business and real estate have been strong during this pandemic and have grown beyond belief. No doubt, a correction is somewhere down the line. However, the basic mantra that runs through our money management style is simple: If you like an investment for purchase today, you should also like it for a week, for a month, for a year and perhaps for a decade.
My daughter Diane sent me an Oprah podcast last week about gratitude. Here are some highlights: Practicing gratitude is the single best way of changing your personal vibration. Instead of bemoaning our fate, we can trust our fate. Two minutes of gratitude a day for 21 days will change a pessimist to an optimist. When you are flushed with worry, let grace flood in and tell you that you will be alright. No matter what your financial status, you can feel value in life. Remember, the word “wealth” comes from “well-being”.
Our world is in the middle of a comeback from a deadly disease. Here is hoping that we can all get back to our normal lives…with gratitude…sooner than later.
Today’s the day.
 Weekly Market Recap (jpmorgan.com)