July 2020 – Market Commentary

July 2020 – Market Commentary

Market Commentary

The ongoing Covid pandemic affected the market, both higher and lower, in June.  In our last market commentary, we said the probability of a short term pull back was very high and just a few days after our commentary was posted, from June 8th until June 11th, the DOW Jones dropped nearly 9%, and then again from June 23rd to June 26th, the DOW Jones dropped about 5% (Source:  https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI).  In both cases, the market recovered eventually and ended the month with a slight gain, but it was a wild ride.  We’re still quite a bit ahead of the DOW in our in-house managed portfolios year to date but we were slightly negative for the month because of the volatility.

When you take a step back and look at the social unrest, spiking Coronavirus numbers in many states, and a corporate earnings season approaching that will almost certainly be dreadful, you’d think the market would be in a tailspin downward.  The Federal Reserve has been committed to Quantitative Easing (QE) for about 3 months now.  QE was last used during the financial crisis in 2009. The simplest description is that the Federal Reserve prints money and then buys stocks and bonds with it.  This helps to provide stability to the markets, because you have a constant buyer coming in.  Because of this, by many measures, this is once again the most overvalued market in 80 years.   Corporate earnings have dropped because of the shutdowns related to Covid, so Profit/Earnings (P/E) ratios are dangerously high.  Stocks are not a good value by historical standards, but that doesn’t mean they cannot keep going up, so we’re continuing to digest that.

Our portfolios are currently set to own more stock relative to the past few months because our research said a short term surge up was very likely and we wanted to take advantage of it.  We ended the month very strong because of this.  However, in the coming weeks, Wall Street companies will share their Covid altered earnings numbers for the second quarter.  Because of this, the probability of a short-term pullback has increased dramatically in the next month or two once again, and we hope to sell a portion of our stocks for a nice profit very soon.  With the election coming up soon, that may add volatility as well.

You trust us with your retirement savings, and we believe riding markets up and down as much as 10% in a single day is not what you signed up for. A big mistake can be the difference between retiring early or working extra years. It can be the difference between running out of money before end-of-life and the long term care costs that come with it, or keeping your pride, dignity and not being a burden to your family. We will continue to be patient as we navigate this “once in a hundred year” pandemic.  We managed the financial crisis in 2007-2009 extremely well and we plan to navigate this difficult time as well with patience and prudence, and so far our experience is paying off. 

 If you have any questions about taxes, your individual investment portfolio, our 401(k) recommendation service, or anything else in general, please give our office a call at (586) 226-2100. Feel free to forward this commentary to a friend, family member, or co-worker. If they would like to receive this commentary in the future, please send us an e-mail at info@summitfc.net at your earliest convenience. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

Thank you for your confidence and referrals!

Bob, Ken, Jim, and Zach
Summit Financial Consulting

Interesting Points
Since 2000, China’s economy has roughly quadrupled in size, but its debt has increased by a factor of twenty-four. Source: -Zeihan.com, May 15, 2020

With global call centers closed, Americans only received 2.9 billion robocalls in April which is down from 4.8 billion in February. -PRNewswire, May 6, 2020

Because of the stay-at-home order, California highway police say that overall traffic levels are down 35% from last year.  However, the number of speeding tickets for driving faster than 100 mph has increased 87%, with one motorist caught doing 165 mph. Source: -Los Angeles Times, April 22, 2020

At least 89 coronavirus vaccines are under development around the world, with seven now in human trials. Pfizer says that if its vaccine proves safe and effective, it might be available on a limited basis as early as September. The most quickly developed anti-viral vaccine to date was the one for mumps, licensed in 1967 after four years of research. Source: -International Business Times, April 30, 2020

Colleges in the United States earn roughly $600 billion per year- equivalent to the combined annual revenue of the tech firms Google, Apple, Microsoft, Facebook, Netflix, and Twitter. -The Wall Street Journal, June 18, 2020 

Last month, Elon Musk, who takes no salary from Tesla, earned a performance payout worth roughly $775 million. Musk received 1.7 million Tesla shares to bump his ownership stake up to 20.8%.  Source: -CNBC, May 28, 2020

After going public last week, the peak market value of the little-known electric-truck startup Nikola Corp was $30 billion- higher than Ford’s valuation of roughly $24 billion. Nikola has yet to sell any vehicles. Source: -The Wall Street Journal, June 9, 2020

There are roughly 91,000 dams in the United States and in 2025, 70% of those dams will be more than 50 years old, and currently, 8,000 are over 90 years old. -National Geographic, May 27, 2020

Disclosures regarding our performance reporting:  Because some clients are in the 10% tax bracket and others are in the 37% Federal tax bracket, we have decided to report performance before taxes.  If you have a non-qualified account, please feel free to contact us to determine your individualized rate of return after tax. All of Summit’s performance is after our 1.25% advisory fee that is deducted monthly.  Your fees may be higher or lower depending upon the amount of assets invested with our firm.  Feel free to contact us to receive online access so you can see your personalized rate of return.  The Aggregate bond index we use is ticker: AGG.  All dividends and distributions are reinvested and included in the performance.  The S&P 500 index quoted above does not include dividends within the performance.  If a holding within our portfolio does pay a dividend or other income, it is reinvested, so our performance does include dividends.  This report has been prepared from data believed reliable, but no representation is made as to accuracy or completeness. Total return and principal value will vary depending upon the deduction of advisory fees, brokerage commissions, reinvestment of dividends and other earnings or fund charges. This information is provided to you in combined form, solely for your convenience and ease of review and is not an offer or solicitation to buy or sell any securities. In order to verify that all account values and transactions are accurate, we encourage you to compare the information provided in our statement with the statement you receive directly from your custodian. All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Past performance does not guarantee future results.

June 2020 – Market Commentary

June 2020 – Market Commentary

May ended up being a profitable month for our portfolios and a profitable month for the major stock market indexes as well.  We’re still quite a bit ahead of the DOW in our in-house managed portfolios year-to-date.

There are a lot of conflicting issues to consider this month.  There continues to be protests, both peaceful and violent,  across the country because of the death of George Floyd.  The Coronavirus pandemic continues to take lives, but at a much slower pace than a few months ago.  On June 5th, 2020, the US Labor Department reported a net gain in jobs rather than the expected job losses.  We believe the US will not return to pre-Covid employment numbers for a long time, but it’s an encouraging sign in any case.

The start of June has been positive for the US markets.  By many measures, this is once again the most overvalued market in 80 years because corporate earnings have dropped so much because of the business shutdowns related to Covid.  Stocks are not a good value by historical standards, but that doesn’t mean they cannot keep going up, so we’re digesting that.

Our portfolios are currently set to a more neutral/defensive positioning because the probability of a short-term pullback has increased dramatically in the past week.  However, if the market marches higher, we will fundamentally re-construct our portfolios in anticipation of further stock market gains in an effort to take advantage of the situation. 

We’ll continue to provide timely updates and in the case of our in-house managed TD Ameritrade portfolios, monitor your accounts daily.

If you have any questions about taxes, your individual investment portfolio, our 401(k) recommendation service, or anything else in general, please give our office a call at (586) 226-2100. Feel free to forward this commentary to a friend, family member, or co-worker. If they would like to receive this commentary in the future, please send us an e-mail at info@summitfc.net at your earliest convenience. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

Thank you for your confidence and referrals!

Bob, Ken, Jim, and Zach
Summit Financial Consultin

Interesting Points

Online sales of pajamas surged 143% in April from March, while purchases of pants fell 13%. Source: -CNBC, May 12, 2020

Exxon Mobile lost $610 million in the first quarter, its only loss since 1988. With plunging global demand and collapsing prices, earnings from its oil and gas production fell 91% from a year ago. -Reuters, May 1, 2020

U.S. spending on food away-from-home accounted for 54.4% of total food expenditures in 2018. Source: -USDA, August 26, 2019

At least 89 coronavirus vaccines are under development around the world, with seven now in human trials. Pfizer says that if its vaccine proves safe and effective, it might be available on a limited basis as early as September. The most quickly developed anti-viral vaccine to date was the one for mumps, licensed in 1967 after four years of research. Source: -International Business Times, April 30, 2020

The incidence of STDs in New York City has plunged 80% since the start of the pandemic, an obvious benefit of social distancing. -The New York Post, April 25, 2020

In March, children’s melatonin supplements- chewable gummy bears laced with one milligram of the sleep aid, saw sales pop 87% year-over-year.  Source: -The New York Times, May 18, 2020

Only 51.3% of adult Americans now have a job- the lowest percentage on record since the BLS started tracking that number in 1948. Source: -CNN, May 8, 2020

Disclosures regarding our performance reporting:  Because some clients are in the 10% tax bracket and others are in the 37% Federal tax bracket, we have decided to report performance before taxes.  If you have a non-qualified account, please feel free to contact us to determine your individualized rate of return after tax. All of Summit’s performance is after our 1.25% advisory fee that is deducted monthly.  Your fees may be higher or lower depending upon the amount of assets invested with our firm.  Feel free to contact us to receive online access so you can see your personalized rate of return.  The Aggregate bond index we use is ticker: AGG.  All dividends and distributions are reinvested and included in the performance.  The S&P 500 index quoted above does not include dividends within the performance.  If a holding within our portfolio does pay a dividend or other income, it is reinvested, so our performance does include dividends.  This report has been prepared from data believed reliable, but no representation is made as to accuracy or completeness. Total return and principal value will vary depending upon the deduction of advisory fees, brokerage commissions, reinvestment of dividends and other earnings or fund charges. This information is provided to you in combined form, solely for your convenience and ease of review and is not an offer or solicitation to buy or sell any securities. In order to verify that all account values and transactions are accurate, we encourage you to compare the information provided in our statement with the statement you receive directly from your custodian. All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Past performance does not guarantee future results.

May 2020 – Market Update

May 2020 – Market Update

The Stock Trader’s Almanac has famously said:  “Sell in May and go away!”  The idea is that while the stock market may be positive, it is the least seasonally strong during this six-month period of time each year on average.  We must always keep in mind that past performance cannot predict future performance when making decisions.  We have dozens of indicators that we weigh each and every day, so we do not recommend that anyone use this “sell in May” data as a single trading strategy.  Interestingly enough, so far the data has matched up with the historical perspective:

As of May 4th 2020, the DOW and S&P stock market indexes have lost for three days in a row (Source:  https://finance.yahoo.com/quote/%5EGSPC?p=^GSPC), and that has been a tailwind for our portfolios because we recently started adding more positions that profit when the stock market loses money just like we did in February and March.  In April the markets rebounded, and our portfolios traded sideways to slightly down overall.  Year to date, we continue to outperform by a wide margin with significantly less volatility. 

We plan to make adjustments soon to either add stocks if it appears the market is going to head up, or add more investments that profit when stock market declines if the markets start to head further south.  It appears overall that we’re at a crossroad because the market hasn’t moved very much the past 2-3 weeks.

Another historical data point is that every bear market in the past 100 years has followed the same pattern:  The market dropped, then it rebounded somewhere between 50-65% of the losses (which made most people feel safe again), and then it changed course and headed severely down again.  The bounce up typically lasted 8 weeks.  We’re currently at week 5 of 8 weeks if this historical trend continues.  Again, we do not recommend anyone trade off of this because history cannot predict the future, but it’s an interesting data point to consider.  If history were to repeat itself, the market would go sideways for the next 2-3 weeks and then start crashing again.  Anything is possible, which is why we monitor the portfolios daily.

Why would either of these historical negative patterns occur?  Two potential reasons:

1. Humans always act like humans. They process bad news in repeatable patterns, and go through stages, such as denial, anger, acceptance, etc.

2. In today’s market, we estimate computers control over 90% of trading using complex mathematical algorithms. They have all known stock market data within their database and can map and model likely outcomes and trends. Retracing/rebounding 50% or 65% of a drop is textbook at this point, and since it’s happened 100% of the time in the past, the computers may put more emphasis on it potentially making it a self-fulfilling prophesy.

Alternatively, why won’t the market potentially drop?

1. The smartest minds in the world are all working on treatments and vaccines for Coronavirus, and several treatments have shown promise.

2. President Trump will do everything within his power to get re-elected.

3. The Federal Reserve has the power to increase the money supply. In March 2009 the Fed set the record for the most money printed to support the stock market.  They broke that record by a factor of five times in March of 2020.  There is an old Wall Street saying:  “Don’t fight the Fed”, and there’s a chance that holds true. 

We’ll continue to provide timely updates and in the case of our in-house managed TD Ameritrade portfolios, monitor your accounts daily.

If you have any questions about taxes, your individual investment portfolio, our 401(k) recommendation service, or anything else in general, please give our office a call at (586) 226-2100. Feel free to forward this commentary to a friend, family member, or co-worker. If they would like to receive this commentary in the future, please send us an e-mail at info@summitfc.net at your earliest convenience. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

Thank you for your confidence and referrals!

Bob, Ken, Jim, and Zach
Summit Financial Consulting

Special Request:  If you have a friend or family member who has investments and they are concerned about losing money in the market, please have them contact us to receive a complimentary second opinion.  We can analyze their existing holdings and show them (through independent research) what hidden fees they may be paying, as well as provide a risk assessment.  Call us (586) 226-2100 or respond to this e-mail and we’ll contact them.

Reminder:  You have until July 7th to contact us if you’d like to contribute into an IRA so you can write it off on your tax return.  In addition, we can help you with tax prep!  Please call (586) 459-5340 to find out how much we can save you on your tax preparation expenses. 

Interesting Points

“When written in Chinese, the word ‘crises’ is composed of two characters. One represents danger and the other represents opportunity.” – John F. Kennedy

An Australian study that followed the eating habits of 12,000 people found that those who added eight portions of fruit and vegetables a day experienced an increase in overall mood, health, and life satisfaction- the equivalent of moving from being unemployed to being employed.  Source: -The University of Warwick

Over the past eight years, college enrollment nationwide has fallen by about 11%. Source: -WBEZ, April 21, 2020

On Tuesday, April 7, the TSA screened 97,130 people, down 95% from a year ago. The last time the country averaged 97,000 airline passengers per day was in 1954. Source: -The New York Times, April 9, 2020

Since the beginning of April, the 136-year-old puzzle maker, Ravensburger, has been selling puzzles at a rate of nearly 20 per minute- a 286% increase over the previous month. Source: -Morning Brew, April 14, 2020

In Canada, a pint of beer will cost you about $5.00. Today you can purchase a barrel of Canadian crude oil for less than that. In the U.S., oil producers are starting to see negative prices, meaning they are paying refiners to take the product off their hands. Prices for Wyoming Asphalt Sour, a dense crude oil, recently fell to -19 cents a barrel. Source: -CNBC and World Oil, March 30, 2020

Due to the increase in teleworking during the coronavirus pandemic, Walmart is now selling more tops than bottoms. Source:  -NPR, March 28, 2020

Disclosures regarding our performance reporting:  Because some clients are in the 10% tax bracket and others are in the 37% Federal tax bracket, we have decided to report performance before taxes.  If you have a non-qualified account, please feel free to contact us to determine your individualized rate of return after tax. All of Summit’s performance is after our 1.25% advisory fee that is deducted monthly.  Your fees may be higher or lower depending upon the amount of assets invested with our firm.  Feel free to contact us to receive online access so you can see your personalized rate of return.  The Aggregate bond index we use is ticker: AGG.  All dividends and distributions are reinvested and included in the performance.  The S&P 500 index quoted above does not include dividends within the performance.  If a holding within our portfolio does pay a dividend or other income, it is reinvested, so our performance does include dividends.  This report has been prepared from data believed reliable, but no representation is made as to accuracy or completeness. Total return and principal value will vary depending upon the deduction of advisory fees, brokerage commissions, reinvestment of dividends and other earnings or fund charges. This information is provided to you in combined form, solely for your convenience and ease of review and is not an offer or solicitation to buy or sell any securities. In order to verify that all account values and transactions are accurate, we encourage you to compare the information provided in our statement with the statement you receive directly from your custodian. All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Past performance does not guarantee future results.

April 2020 – Market Commentary & Business Owner Update

April 2020 – Market Commentary & Business Owner Update

Reminder
You have until July 7th to contact us if you’d like to contribute into an IRA so you can write it off on your tax return.  In addition, we can help you with tax prep!  Please call (586) 459-5340 to find out how much we can save you on your tax preparation expenses.

Market Commentary
From 1/1/2018-4/2/2020, our Moderate portfolio has outperformed the DOW by about 21% and the Russell 2000 by about 37%.  While we continue to outperform, our portfolios experienced losses in March because a mortgage fund and some of our “safe haven” bonds we have been invested in for years, unexpectedly started to lose chunks of money.  We have since liquidated the funds, and have moved between 35% to 85% (depending on risk tolerance) of our investments to a money market while we wait for the bottom and/or other opportunities to arise. 

In these highly volatile times, it appears that even the most defensive assets were caught in the selloff.  When volatility spikes and even safe assets lose value, this is typically a red flag for the market as a whole.  We took this as a sign to move to cash equivalents.  We currently have an ample amount of dry powder that we are patiently waiting to use to buy back into the market once we believe it has bottomed. Our belief is that this is an opportunity that comes around once every 10-20 years, and since we already avoided huge losses, we are well positioned to turn this into a potentially very profitable situation in the long run.

We believe that any of these three events could potentially create a situation where the bottom is in and a buying opportunity could come to fruition, but a thorough analysis would be required in any case:

1) Evidence social distancing is working via slowing infection growth
2) Approvals on new treatments
3) Timeline on restrictions easing

We’ll continue to provide timely updates and in the case of our in-house managed TD Ameritrade portfolios, monitor your accounts daily.

Business Owner Update
The three most important things to consider:
-Self Employed business owners can now receive unemployment:

https://www.fox17online.com/news/coronavirus/gov-whitmer-expands-unemployment-benefits-to-self-employed-independent-contractors-and-more

-The Federal Government is now offering emergency SBA loans (the first $10,000 is very easy to acquire) that do not need to be paid back if the money is used on payroll, rent/mortgage for the business, or utilities.  Please apply quickly because the pool of money is supposedly limited: https://covid19relief.sba.gov/#/

-Unemployment payouts have increased significantly with the new legislation signed into law: https://www.cnbc.com/2020/03/27/how-unemployed-workers-could-get-more-than-100percent-of-their-paycheck.html

If you have any questions about taxes, your individual investment portfolio, our 401(k) recommendation service, or anything else in general, please give our office a call at (586) 226-2100. Feel free to forward this commentary to a friend, family member, or co-worker. If they would like to receive this commentary in the future, please send us an e-mail at info@summitfc.net at your earliest convenience. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

Thank you for your confidence and referrals!

Bob, Ken, Jim, and Zach
Summit Financial Consulting

Interesting Points

“The last leg of a bull market (12/2019) always ends in hysteria; the last leg of a bear market always ends in panic (TBD).” -Jim Rogers

A clinical research group in London said it would pay each volunteer $4,480 who agreed to be infected with a virus relative of the novel coronavirus in the hope of finding a vaccine. More than 20,000 people signed up. Source: -The Wall Street  Journal. March 19, 2020

Almost half of the new condos that have come to market in Manhattan since 2015 are currently unsold. One of the reasons: overly ambitious pricing. In 2012, the difference in the average price between a new and a resale unit was 22%. At the end of 2019, the premium was 118%. Source:  -The Morning Brew, January 13, 2020

The average U.S. household bottomed out at 2.52 people last year, the lowest household size in the history of the country. Germany has the lowest household size in the world at 1.99. Source: -NumlockNews, February 11, 2020

“To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.”Sir John Templeton

Coal now stands as the world’s most expensive fossil fuel on an energy-equivalent basis. Australian Newcastle Coal traded at $66.85 per ton Friday, March 20th, which is equivalent to a $27.36 priced barrel of oil. Source:  -Bloomberg, March 23, 2020

Since residents were ordered to shelter in place, demand for electricity in New York and San Francisco has been down between 300 to 600 megawatts- the equivalent of a midsize gas power plant. On a separate note, marijuana sales are up 159% in California, up 100% in Washington state and up 46% in Colorado. Source: – E&E News, March 23, 2020

Disclosures regarding our performance reporting:  Because some clients are in the 10% tax bracket and others are in the 37% Federal tax bracket, we have decided to report performance before taxes.  If you have a non-qualified account, please feel free to contact us to determine your individualized rate of return after tax. All of Summit’s performance is after our 1.25% advisory fee that is deducted monthly.  Your fees may be higher or lower depending upon the amount of assets invested with our firm.  Feel free to contact us to receive online access so you can see your personalized rate of return.  The Aggregate bond index we use is ticker: AGG.  All dividends and distributions are reinvested and included in the performance.  The S&P 500 index quoted above does not include dividends within the performance.  If a holding within our portfolio does pay a dividend or other income, it is reinvested, so our performance does include dividends.  This report has been prepared from data believed reliable, but no representation is made as to accuracy or completeness. Total return and principal value will vary depending upon the deduction of advisory fees, brokerage commissions, reinvestment of dividends and other earnings or fund charges. This information is provided to you in combined form, solely for your convenience and ease of review and is not an offer or solicitation to buy or sell any securities. In order to verify that all account values and transactions are accurate, we encourage you to compare the information provided in our statement with the statement you receive directly from your custodian. All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Past performance does not guarantee future results.

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Phone: 586-226-2100
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Investment advisory services are offered through Summit Financial Consulting, LLC, a MI registered investment advisor. Insurance products and services are offered through Summit Financial Consulting, LLC.  Summit Financial Consulting, LLC and its representatives do not render tax, legal, or accounting advice. Summit Financial Consulting, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency.