Market Commentary
July proved to be a profitable month for both our portfolios and the stock market indices. While the DOW Jones is still down about 11% from the highs earlier this year, it made some progress in July (Source: https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI). The markets seem to be bouncing up and down within a range the past few months and we’re doing our best to buy when the market is on the low end of the range and sell when it’s on the high end of the range. Continuing with that theory within our in-house managed TD Ameritrade portfolios, we sold some stocks in the last two weeks of July when we felt they were high enough to reap the profits. If the market moves up out of the range, we plan to buy more stocks to participate, but for now, especially with the election coming soon, we’re taking a measured approach to taking on risk.
Gross Domestic Product, or GDP was reported this week and it was the worst report in history. Second Quarter GDP plunged 32.9%, but this is understandable because of the virus related shutdowns nationwide. Corporate earnings season is underway with mixed results. Half of all financial companies have reported earnings and so far their profits have dropped over 30%. Alternatively, some technology companies, especially companies that benefit from employees working from home, have seen a surge in profits. As you know, we’re sector investors trying to always find the most efficient place to invest your hard earned savings. We had a large percentage of our stock holdings in technology in July.
Some clients have asked why we reduce risk when we believe the market is potentially overvalued. 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 1928, the stock market has accurately predicted the winner of the presidential election 87% of the time, including every single election since 1984. When the S&P 500 has been higher the three months before the election, the incumbent party usually has won; when stocks were lower, the incumbent party usually has lost. Source: -Business Insider, June 29, 2020
The IRS audited just 0.59% of individual tax returns last year, the seventh consecutive decline amid budget and staffing cuts at the agency. -The Wall Street Journal, May 20, 2020
In May of this year, unemployment benefits accounted for 6% of U.S. income; in February, they were just 0.1%. Source: -The Associated Press, July 17, 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
The average U.S. grocery store stocks about 33,000 different items, nearly four times as many as it did in 1975. That includes 400 different types of Campbell’s Soup and 40 different varieties of toilet paper. -The Wall Street Journal, June 27, 2020
In the first half of 2020, more than 3,600 companies filed for bankruptcy. Just over 600 filed in June alone. Source: -Axios, July 10, 2020
In 1973, Elvis Presley was the top taxpayer in the country. His manager, Colonel Parker, was in the U.S. illegally and went to great lengths to stay off the government’s radar, including, allegedly, encouraging Elvis to overpay his taxes in order to not attract additional government scrutiny. It is reported that one year Elvis paid 91% of his income to the IRS. Source: -Legacy.com
In a sign of how long some investors expect low rates to last, Austria recently issued government bonds that will only pay 0.88% interest- for the next 100 years. -Bloomberg, June 24, 2020
Notes & Disclaimer: Stock market indices, like the S&P 500 Index, are unmanaged groups of securities considered to be representative of the stock market in general or subsets of the market, and their performance is not reflective of the performance of any specific investment. Investments cannot be made directly into an index. Historical returns data are calculated using data provided by sources deemed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, or correctness. This information is provided “AS IS” without any warranty of any kind. All historical returns data should be considered hypothetical. Past performance is no guarantee of future results.
This communication is only intended for recipients who reside in states where our agents are licensed to sell these products. Investment advisory services are offered through Summit Financial Consulting, LLC, an SEC registered investment advisor. Registration does not imply a certain level of skill or training. Summit Financial Consulting Investment Advisor Representatives do not render tax, legal, or accounting advice. Insurance products and services are offered through Summit Financial Consulting, LLC. Note: Please update Summit Financial Consulting, LLC, if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually. Please consult Summit Financial Consulting for a copy of this document should you need an additional copy. All guarantees are subject to the claims paying ability of the issuing insurance company. Past performance cannot predict future performance. It is not possible to invest directly in an index. The Sherman Group, LLC is not associated with Summit Financial Consulting, LLC in any way, other than a research sharing partnership. Back testing is more heavily scrutinized than any other type of investment analysis because it can be updated to take advantage of past data. The algorithms and trading signals that we receive from the Sherman Group, LLC were created using back testing with the goal of creating a sustainable research process. We have reviewed data from the entire 20 year period which was mostly back tested, and have also personally reviewed the live data for the past 5 years and feel comfortable with it, but we encourage you to meet with us and ask questions so you are fully informed on what we plan to do with your investment assets at TD Ameritrade. It is important to look at fees, taxable repercussions, and trading frequency when looking at a rate of return number. There is no perfect system or research feed, and Sherman Group, LLC has had both longer term and short-term periods where they lost money. Investing involves risk, and these portfolios are no exception.
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, and all dividends and distributions earned are reinvested and included in the performance numbers. The S&P 500 index and Dow Jones 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 and because of this, especially if you are a brand new client that was invested in the middle of the month or if you made a deposit or withdrawal in the month, adviser’s clients may have had materially different results from the results portrayed in the performance numbers disclosed. 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. The performance data in this report represents past performance and does not guarantee or imply future results. Current performance may be lower or higher than the performance data quoted in this report. Because we use bond funds and inverse funds as hedges, there will be months where we underperform the Dow Jones and the S&P 500 index, but also months where we will outperform. We do our best to manage stock market volatility, but anything is certainly possible.
The returns are calculated using a true daily time-weighted rate of return (“TWRR” as a primary performance return methodology). TWRR is the CFA Institutes Global Investment Performance Standards (“GIPS”) required calculation for managed accounts. TWRR provides a measure of how an account was managed regardless of the dollar value and is unaffected by external cash flows. TWRR is required in GIPS Guidelines for managed accounts for two primary reasons:
1. Impact of external flows on TWRR: Since an advisor typically does not control the timing or magnitude of investor cash flows, TWRR is deemed appropriate as it isolates performance regardless of the portfolio/account’s dollar value and external flows.
2. Comparison across portfolios and benchmarks: TWRR can be used to directly compare performance with other portfolio/accounts and is an appropriate metric to use when comparing portfolio/account performance to benchmarks.
Please update Summit Financial Consulting LLC if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually. Please consult Summit Financial Consulting for a copy of this document should you need a copy.