The recovery in the financial markets hit some turbulence in October, as investors wrestled with anxiety about increasing COVID cases. However, a surge in gross domestic product (GDP) in the third quarter may signal that the economy is on the rebound.1
Through October 28, all major indexes had mostly recouped most of their losses from the COVID crash in March. However, all were down for the month of October. Below is each index’s return from October 1 through October 28:
S&P 500: -2.73%2
Here are the year-to-date returns of the major indexes:
S&P 500: 0.40%2
What spooked the markets in October? There are a few factors, but as is the case with most things in 2020, COVID may be the primary factor.
COVID Cases Ramp Up
The COVID numbers are surging in the United States, suggesting that the end of the pandemic may be nowhere in sight. On Wednesday, October 28, the seven-day average for new daily cases hit an all-time high of 71,832, an increase of more than 20% in only a week.5
Twenty-nine states hit record levels for daily new cases in October. Forty states had an increase of 10% just in the last week of October.6 Thirty-six states had increases of at least 5% in COVID-related hospitalizations in the final week of October.5
The surge in cases is leading to a new round of business closures and regulations. Illinois recently stopped indoor dining at bars and restaurants.7 Investors may be spooked by the prospect of a second round of closures and its impact on the economy. A new report from Yelp found that 60% of businesses that were shutdown for COVID will never reopen.8
The uncertainty of a second stimulus may also be a drag on the markets. In fact, Gary Cohn, former president and CEO of Goldman Sachs and former White House National Economic Council Director, says it is a primary factor driving the markets’ poor performance in October.9
He added in a recent interview that, “no one thinks we’re going to have stimulus until after the election,” and that, “we know that the markets do not like unpredictability.” He said that there was “100% probability” that stimulus won’t happen until after November 3rd, and possibly not until after the inauguration.9
Some recent data on mutual fund flows may provide insight into how investors feel about the financial markets. Through October 21, equity funds (including mutual funds and ETFs) saw net outflows for 11 consecutive weeks. That means more money flowed out of these funds than flowed into them.10
On the other side, taxable fixed-income ETFs have seen four straight weeks of net inflows. That may mean that investors are leaving equities for fixed income securities, even with interest rates near zero.10
GDP Surges in 3rd Quarter
On a positive note, GDP surged by 33.1% in the third quarter, beating analyst expectations of 32%. The third quarter number is the largest quarterly GDP gain on record, easily beating the previous high of 16.7% in the third quarter of 1950.11
Of course, the third quarter surge comes after a 31.4% decline in GDP in the second quarter. Even with the increase in the third quarter, the economy is still projected to contract by 3.5% in 2020.11
The markets and the economy have rebounded, but the future is still uncertain. This may be a good time to explore options that can protect your assets from market volatility. Contact us today at First Fidelity Group. We can help you explore these options and implement a strategy to protect your financial future. Let’s connect today and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20420 - 2020/9/18
Starting college is supposed to be a milestone moment, not just for the student, but also the parents. You pack up the car and make the drive to your child’s dorm. You may set up furniture, meet their roommate and even take a tour of campus. Eventually, the move-in process ends, and it’s time to leave your child on their own, ready to start the next chapter.
COVID changed that experience for many families, just as it has impacted nearly every corner of society. Many colleges moved their classes online. And many schools that previously planned on opening in-person reversed those decisions.1
No matter where your child is attending school, it’s a costly proposition. In-state public schools had average tuitions of $11,260 for the last school year. For out-of-state public schools, the average cost is $27,120. Private schools are even more costly, at an average tuition of $41,426.2
That’s a difficult expense, even during normal times. But it may be more challenging in the current environment. Perhaps you’ve lost a job or seen reduced income. Or maybe you’re worried about your financial future as the pandemic continues to impact the economy. The cost of college only compounds these issues.
Fortunately, there are some steps you can take to manage the cost and protect your financial future. Below are a few steps to consider:
Cut back on expenses.
Budgeting and cutting expenses are always helpful strategies, but they’re especially important during times of crisis. This doesn’t just apply to paying for college, but also saving for retirement and other financial goals.
Take some time to go through your monthly expenses and look for areas to cut back. You also may be able to work with your lenders to minimize some bills. Many mortgage companies, credit card companies, and others are offering forbearances during this crisis. You may be able to put your payments on hold. Contact your lenders for more information.
Consider using your Roth IRA or CARES distributions.
Tapping into your retirement accounts could be an option, although it may have some adverse consequences for your finances in the future. If you have a Roth IRA, you can always withdraw your contributions without facing penalties or taxes.
You could also take distributions from your IRA or 401(k) via the CARES Act, which was passed earlier this year. Under the CARES Act, you can withdraw up to $100,000 from a 401(k) plan with no penalties and the ability to pay the taxes over a three-year period. That could be an option to cover tuition payments.3
However, even if you don’t pay penalties, a distribution from a retirement account could have other consequences. You’ll not only lose the distribution amount, but all future tax-deferred growth on those funds. That could limit the amount of assets you have available when you retire. Explore all options before tapping into your retirement funds
Reevaluate your options.
Another option is to simply reevaluate the college experience. If your child’s school has moved to online only, consider whether it makes sense to pay in-person tuition for an online education. Perhaps your student could transfer to a community college or even an online-only school at a far lower rate. They can earn credits and then transfer back to their desired college when in-person classes are back in session. It reduces the cost, without a substantial change to the learning experience.
We’re here to help you explore all your options in paying for your child’s education. Let’s connect soon and start the conversation. Contact us today at First Fidelity Group.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20361 – 2020/8/20
Are you planning to retire in the coming year? If so, this is likely an exciting time. You’re probably busy wrapping up final projects at work and planning for fun and exciting ways to fill your time after you retire.
While you may have a full plate right now, this is also a good time to analyze your financial strategy and take any outstanding planning steps. Of course, you may not know what steps you need to take. Retirement can be a significant financial challenge. It can be difficult to know what risks you may face.
Do you have a list of New Year’s resolutions? Does that list include financial goals and objectives, like paying down debt or boosting your savings? Now is the perfect time to analyze your financial situation and develop a list of action items. A regular annual financial checkup can help you stay on top of potential risks and on track to meet your biggest financial goals.
However, if you’re not in the habit of regularly reviewing your financial needs and goals, you may not know where to begin. Below are three items to include on your financial checklist. If you haven’t reviewed these items recently, the beginning of the year may be the perfect time to do so.
First Fidelity Group
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