Happy Friday, clients! We all faced this pandemic together this week, settling into new routines and taking care of ourselves and our families. Many unknowns still remain in the coming weeks, and we will keep you informed with consolidated updates like this one about current market conditions.
On a business note, our team is primarily working from our homes, with one or two people in the office to take your phone calls. We’re holding all meetings via video conference and telephone, so we encourage you to call or email to schedule an update meeting!
Job Losses: The country has seen two weeks straight of record job losses adding up to 10 million since the pandemic began. That reality is driving a lot of the other factors in the market right now.
Municipal Bond Volatility: The steep job losses suddenly drove a decline in the value of municipal bonds. Bond investors lost confidence because of the realistic fear that cities and states will have significantly lower income tax and other revenues (e.g. casino revenues, sales taxes, new car license plates, etc.). In addition, cities and states have higher costs due to coronavirus expenses. CPFP sold municipal bonds in portfolios and moved to cash and Treasury Bonds to better provide stability and income.
Oil Production: President Trump has discussed the U.S. reducing domestic oil production, in large part because the coronavirus is spreading among workers on offshore platforms. This change could positively affect the ongoing price war between Saudi Arabia and Russia, which would be a boost to the markets in general. Saudi Arabia and Russia are supposed to hold talks on Monday about potentially reducing oil production.
Equities: Stocks fell to end another volatile week of trading, pressured by a spike in coronavirus-related deaths in New York, while investors digested the dismal U.S. jobs report. Look for detailed metrics in our quarterly newsletter, coming soon via email.
CARES Act Updates
We've seen more details clarified in the last week about the CARES (Coronavirus Aid, Relief, and Economic Security) Act. If you have any specific questions about tax implications, we encourage you to work with your tax professional.
Here are some key points from the CARES Act that may apply to you:
- Relief Checks: One-time payment of up to $1,200 per adult ($500 per child) for those who qualify within a specific income threshold based on 2018 and 2019 tax filings. Consider updating the IRS with Form 8822 if your banking or address information has changed since you filed your most recent taxes.
- Retirement Accounts: Early distributions from retirement accounts are temporarily penalty-free if they can be attributed to the pandemic, though you'd still owe taxes on the full amount at your ordinary income rate.
- Small Business Loans: There are opportunities for business relief for self-employed and small business owners. Small businesses with fewer than 500 employees have access to grants, forgivable loans, and other measures starting today (4/3/2020). Start by calling the bank with which you hold your business account.
- Donations: The CARES Act allows you to deduct up to $300 for charitable donations in cash if you take the standard deduction.
The complex relief plan and associated tax implications will affect every individual in different ways, which is why we strongly encourage everyone to talk with your tax professional before taking any action. We’re here to help but want to make sure you are getting the most accurate information.
Our goal is to protect your capital and reduce financial stress while you focus on the other priorities in your daily lives. Every question and discussion is welcome! If you’re ever concerned or need further clarity, please let us know. We are working regularly from our safe, remote environments but our service to you has not changed.
Stay safe and well, enjoy your weekend, and we look forward to talking again soon!
Carol & Tim and your Clear Perspectives team