Category: blog

Wes Johnson Named as Longview’s New Chief Investment Office (CIO)

Press Release
July 2021
For Immediate Release

Longview Financial Advisors Selects New Chief Investment Officer

Longview Financial Advisors, Inc. is pleased to announce the appointment of Charles Wesley Johnson as its next Chief Investment Officer. Wes will take over the Chief Investment Officer role from Jeff Cedarholm on July 1, 2021.

Cedarholm, who is semi-retiring at year’s end, is excited about this transition.  “It’s hard to believe, but I met Wes Johnson at least 20 years ago, and at our first meeting, we discussed investing. Here we are years later and not only is he still intrigued, but has become a very good investor himself.  Wes earned his bachelor’s degree in economics from Jacksonville State, then earned a master’s degree in Family Financial Planning and Counseling from the University of Alabama. He has recently earned his CIMA® Designation (Chartered Investment Management Analyst®) from the Investment and Wealth Institute.  He has been working on our firm’s investment team since 2006. As his long-time colleague, I feel you will find Wes very knowledgeable and forthcoming about investing and also very caring of client and fellow employee needs.”

“I am honored and humbled to step in as the Chief Investment Officer” says Johnson. “Longview has high standards of education and transparency that I look forward to continuing.  I will continue to foster a collaborative environment focused on helping clients achieve their goals.  I am excited to be a part of Longview as we help people to live with fulfillment and give with purpose.  I truly cannot overstate how excited I am to be chosen to serve in this role” he continued.

Longview Financial Advisors is a financial planning and wealth management firm which specializes in tax, estate, and retirement planning along with philanthropic giving. For more information about Charles Wesley Johnson and the team at Longview Financial Advisors visit https://longviewfa.com/.

1st Quarter 2021 Market Commentary

Note: This market review was published on May 3rd, 2021 and may not be reflective of current market or investing issues.

The first quarter saw strong equity returns in the US with the S&P 500 up just over 7%1. International markets lagged the US, with the MSCI ACWI ex US increasing almost 3.6%2.  Under the surface, there was a rotation of leadership that took place in the market from growth to value assets.  Many of the large cap growth companies, that were up strong following the COVID-19 crash, have begun to lag the more cyclical companies.  The largest company in the world, Apple, has experience two 20% drawdowns in the last six months3.  In spite of the declines in large cap tech companies, like Apple, the broader market has been able to push to all time highs because of this rotation. Along with the rotation from growth to value, small cap stocks have also started to outperform large cap names.  It begs the question “what’s going on?” 

The simplest way to answer that is the expected, and ongoing, economic recovery.  With the rollout of the COVID-19 vaccines in the United States going better than expected, and states beginning to reopen their economies, economic activity is increasing.  When there is strong economic growth, along with expectations that growth will continue or accelerate, value stocks tend to outperform their growth counterparts and small cap stocks tend to outperform large cap. 

There are still a few concerns that could de-rail this economic recovery.  First of all, while the vaccine rollout in the United States has been faster and more effective than most thought it would be, countries around the world are not seeing the same success. If other countries are not able to increase the speed of their vaccinations, their economic issues could affect our economy due to how intertwined global trade is.  Second, it seems that every few weeks there is another variant of the COVID-19 virus that pops up somewhere around the world.  We have seen the UK variant that seemed to have a higher transmission rate, the South African variant that seemed to have a higher fatality rate, and now there is an Indian variant that has started to spread.  If one or more of these variants are found to be transmittable despite one being vaccinated, then we could end up seeing mask mandates, social distancing, and lockdown protocols being issued again, which would at best slow the economic recovery and at worst send us into another recession.

While the economy seems to be off to a strong new expansionary period, there are also concerns as to whether or not the expansion is sustainable once fiscal and monetary support are scaled back or removed.  Currently, the Federal Reserve Bank of the United States has their primary interest rate set between 0% and 0.25%, making capital very cheap for businesses that need it.  The federal government has been spending money at a record pace in order to support businesses, state and local governments, and individuals.  Unemployment insurance has been expanded to support more people, at a higher level, for longer periods of time. Direct payments have been sent to individuals who meet certain income requirements, state and local governments have received monetary support due to decreased tax revenue, and businesses were able to apply for PPP loans that for many were forgiven.  Once these support systems of the economy begin to fade away it is unclear if the economy will be able to stand on its own. 

Additionally, with the amount of spending that has been seen there is an increased fear that inflation could see a meaningful increase for the first time in well over a decade.  There have already been a few companies that have come out publicly and said that they are going to have to raise their prices due to increasing costs that they have seen over the past few months.  If these trends continue, inflation could exceed the Federal Reserve target of 2%, which they have said they would welcome based on their new average inflation target.  It is important to know what the effects would be if inflation were to see a sustainable increase of over 2%.  Some of the first effects would likely be commodity prices and interest rates rising, and the value of the US Dollar declining.  What would this mean for asset prices though?  Bonds, especially treasuries, would decrease in value as interest rates rise. Stocks would most likely have a mixed reaction.  Growth stocks that have done so well over the past decade, especially those that have not proven profitable, would likely struggle as the cost of capital rises for them and they are no longer able to fund their growth with cheap debt.  Value stocks, especially those that have higher pricing power, would likely benefit from the strong economic growth and increased spending of consumers. 

While there will always be more questions than answers when it comes to future performance in markets, we can use current data and historical references to make informed investment decisions.  As the supposed quote from Mark Twain goes, “history doesn’t repeat, but it does rhyme.”

1https://www.cnbc.com/quotes/.SPX

2Morningstar.com

3https://www.cnbc.com/quotes/AAPL?qsearchterm=aapl

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

What Does Fiduciary Mean to Us?

A fiduciary standard, when applied to a financial advisor, says the advisor has a legal duty to act in good faith and trust, placing your best interest above that of the advisor or their firm. The advisor is ethically and legally bound to act in this manner.

At Longview, we aren’t just fiduciary by law; we’re fiduciary by choice. All of our advisors sign a fiduciary oath to put your interest before our own.

Recently, several of our team members talked about what being a fiduciary means to them. Check out the videos below to hear what they had to say.

Federal Income Tax Deadline Extended for Tax Year 2020

On Wednesday, March 17th, the Treasury Department and Internal Revenue Service (IRS) announced in a news release (IR-2021-59) that they were extending the filing due date for individuals for the 2020 tax year from April 15th, 2021 to May 17th, 2021. Tax payers can postpone federal income tax payments until May 17th, 2021 without penalty or interest. Penalties and interest will resume on any unpaid balance as of the new deadline.

It’s important to note, the extension does not apply to estimated tax payments due on April 15th. Additionally, unless your state follows with their own extension, state tax deadlines remain unchanged at this time.

IRS Commissioner Chuck Rettig shared in the news release, “This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities. Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

The extension does not require additional forms; however, extending until October 15th still requires a extension request be filed.

I’m Selling My Home. Will I Pay Taxes on the Gain?

Note: This article was published on January 11th, 2021 and based on tax law at the time. Tax laws are subject to change.

As financial planners, we often have clients wanting to sell their home. They may be doing it to purchase a larger home for their family, downsizing their home in retirement, or simply deciding to move to another area. At the time of this writing, some housing markets are very hot, and homes are being bought and sold at a rapid rate. In saying this, we often have clients asking about the tax consequence of selling their home.

Your home is considered a capital asset. It is important to understand how capital assets are taxed when they are sold. When capital assets are sold, they may receive different tax treatment than ordinary income (e.g. wages). When an asset with an appreciated price is sold, the gains on the sale (sale price minus cost basis) are treated as either short-term capital gains or long-term capital gains in the year the asset is sold. This is reported on Schedule D of the tax return. A short-term gain is when the asset was held for one year or less. These are taxed at your ordinary income tax rate, which depends on your Adjusted Gross Income (AGI). A long-term gain is when the asset was held for more than one year. Long-term capital gains receive preferential tax treatment and are taxed at either 0, 15%, or 20%, again depending on your AGI.

There is good news. The IRS tax code will allow the capital gains on the sale of your home to be excluded from taxation (not counted in your AGI) under specific limits, if certain requirements are met. This rule is found under “Section 121” of the tax code. If you file “Single” on your tax return, you may exclude up to $250k worth of capital gains from the sale of your home. Likewise, if you file “Married Filing Jointly”, up to $500k of capital gains from the sale of your home may be excluded. The transaction is not reported on Schedule D of the tax return and does not require any additional tax forms.

As previously mentioned, there are certain requirements that must be met to qualify for the Sec. 121 exclusion. One rule is that the home must be considered your principal residence. The taxpayer must have lived in the residence for two years within the five-year period preceding the sale of the home. These two years do not have to be consecutive. Either 24 full months or 730 days will satisfy the two-year ownership and use requirements. A prorated exclusion is available if the two-year requirement is not fully met. It’s also important to note that there are certain exemptions that exist if the two-year requirement is not met.

See below for some common situations regarding Sec. 121 of the tax code:

Example 1

Jeff is single and bought his home in 2012. The purchase price then was $100k. He has not made any additional improvements to the home. He sells his home for $200k in 2021. This home has been his principal residence every year for the last 9 years. Jeff meets the requirements under Sec. 121 of the tax code, meaning he can exclude up to $250k in capital gains from this transaction. The $100k in gains that resulted from the sale of his home are excluded from taxation. He will not have to report this on his Schedule D or add $100k to his AGI on his tax return. 

Example 2

John and his wife, Linda, bought a home for $600k on July 30, 2020. The homes in this market are rapidly appreciating due to companies opening in the city that offer high-paying jobs. John and Linda find a different home across town that they just cannot resist. They decide to sell their current home for $800k on January 30, 2021, 6 months after originally purchasing the home. They have not fully met the two-year requirement, which would have allowed them to exclude up to $500k in capital gains (married filing jointly). The prorated calculation is as follows: (months lived in home ÷ 24-month requirement) × full exclusion amount. Of the $200k in capital gains from the sale of their home, only $125k can be excluded [(6 ÷ 24) × 500k]. The remaining $75k (short-term capital gain) will be reported on their tax return and be taxed at their ordinary income tax rate.

Example 3

Jason’s grandmother passes away. She leaves her home to Jason in her will. She bought the home 40 years ago for $50k. The home was valued at $100k on the date of her death. Jason  inherits the home via the probate process. Because of this, Sec. 121 of the tax code doesn’t come into play. Under current tax laws, he receives the home with a “stepped-up basis” according to the value of the property at her death, which was $100k. If he sells the home immediately for $100k, he pays no capital gains tax. If he were to sell it in a few months later for $110k, he would be responsible for paying short-term capital gains tax on the $10k of gains.

I hope you found this information informative. Please click here for more information on this topic directly from the IRS website.

Happy New Year! A Look Back at 2020.

Our January letter to clients is always a look back at the previous year. We share the many fantastic things that our team and our clients have done. We take time to celebrate the wins of the previous twelve months and use it as momentum toward the next twelve. We cannot think of another year in the history of our firm where this process has been any more important. 2020 was trying. It challenged us all as individuals, families, employers, and employees in ways we could not have expected. It tested our perseverance and our resolve. But, it also highlighted our ability to adapt and be flexible in a situation outside of our control. It delivered important lessons. We became more grateful, more compassionate, and more family-oriented. We cooked at home more, supported local businesses, and enjoyed the great outdoors. We realized that despite what is going on around us, we will make the best of the situation. So, in keeping with that thought, here’s that annual list of celebrations and “making the best of the situation”.

In January, Jeff transitioned the president’s role to Jessica. Jeff and Jessica had been working on this transition for several years. Jeff remains as the Chief Investment Officer.

In March, Longview supported Toasting with Tallulah, an event that raises funds for the Women’s Philanthropy Society. The society is a group of women who are focused on making a difference, with a concentration on women and children. Each year, they give a $50K grant for a project that will create systemic change in the Greater Huntsville area. March was also the month that we were forced to close our offices due to COVID-19. However, we celebrate that we were able to transition into working from home fairly easily.

Chad Odell and his wife, Tyla, welcomed a beautiful and healthy baby girl, Sophia Grace, in April. Also in April, we participated in the HudsonAlpha Alumni meeting. Longview partners with HudsonAlpha to sponsor these events every year. We also took time to celebrate our office manager, Debbie, for Administrative Assistant Day. She is certainly the glue that holds us together! She has done a terrific job of managing the day-to-day as we have transitioned to working from home.

When not working with clients, we spent May and June working toward identifying better tools to communicate and share with clients. You can see this through the increase in communications through social media and our newsletter. We’ve also added videos to our website and are continuing to build out other processes and implement technology that our clients may find valuable.

In July, Andrew Gipner and his wife, Kristin, welcomed sweet baby #2, Liam Shea Gipner. Andrew was also named as a board member on the Leadership Greater Huntsville Board. He has volunteered with the organization for several years now, most recently serving as the Program Chair for the Connect 22 class.

In September, Jeff Jones was named as the National Association of Personal Financial Advisors (NAPFA) Treasurer. Jeff was named to the National Board in 2019.  Also, in September, Longview supported the Community Foundation’s Summit On Philanthropy. We have been long time partners of the Community Foundation and are so proud to be able to continue to support this organization.

In October, we supported the HudsonAlpha Tie The Ribbons event. This is an annual event that supports vital breast cancer research.

Once again, we supported the HudsonAlpha Alumni event in November.

In December, Chad Odell not only earned his CIMA® designation, but also passed his Series 65 exam, which allows him to become a Registered Investment Advisor. We finished off the year with a virtual holiday party and fun games. The Gipners are indeed the reigning champions!

We celebrate that even during difficult times, we have had the opportunity to continue to support our communities through our time, efforts and assets.

As we embark into 2021, we want to thank you. Thank you for your continued trust and support. Thank you for adapting with us to new technology and new ways of meeting and communicating. We learned a great deal over the last year. But, the most important lesson we learned is that we are all in this together. So, thank you for your support of not only our firm, but the other families and businesses in our communities.  May 2021 bring even more to celebrate!

4th Quarter 2020 Market Commentary

Note: This market review was published on December 28, 2020 and may not be reflective of current market or investing issues.

As 2020 comes to a close, it is a good time to reflect on how markets have performed throughout the year.  There has been a multitude of external factors that have had an impact on markets this year that include, Brexit, COVID-19, U.S. Elections, and a trade war.  With all of these in mind it is hard to imagine that here in December we would be at or near all-time highs in U.S. equity markets. With that said, investors have had record amounts of support both from monetary and fiscal authorities around the world.

With all of the negative effects that COVID-19 has had on the global economy, as of December 15th, the S&P 500 is up more than 13%1, the NASDAQ is up 39%2, and the Dow Jones Industrial Average is up 5%3 from the beginning of the year. Other asset classes have also done well this year; gold is up 19%4 for the year while silver is up 34%5.  However, not all assets have had a great year, the U.S. Dollar has fallen a little over 6%6, and WTI Crude Oil is down over 15%7 after being priced negatively in April.

Central banks around the world have provided unprecedented support to markets this year.  The Federal Reserve Bank has gone beyond just the purchasing of U.S. Treasury assets, and has purchased both mortgage-backed securities and corporate debt.  This amount of support was needed to provide liquidity in a time when companies were unable to get the funding that they needed in order to continue to operate.  The Fed also lowered their overnight lending rate to 0% and has expressed their intent to keep the rate at or near 0% for an extended period of time. 

What is really different about the response this time, as opposed to the Great Financial Crisis, is that federal governments around the world have taken a much more aggressive fiscal stance in response to the shutdowns.  In the United States, our Congress passed the CARES Act in March that allocated $2 trillion to different programs to support the economy.  Some of those programs included direct payments to certain individuals and families based on prior income, loans to businesses to support payroll, and funds to industries that were severely affected by the virus (i.e. airlines). In addition, Congress has also passed additional funding of $908 billion to further support the economy.

While these programs are indeed needed after the economy was all but closed entirely for months, it is not yet known what type of long-term effects they will have on our economy and markets.  With the amount of money being printed and spent by the federal government, we expect that inflation will increase, leading to higher commodity prices. Returns for broadly diversified portfolios will vary from year to year but are likely to be depressed over the next decade as we have essentially borrowed against our future returns to fuel this year’s dramatic rally. Fixed income will be one of the most difficult places to allocate funds as rates around the world are near or below 0%, although interest rates are poised to head higher if inflation does start to increase over the next few years.

Sincerely,

Longview Financial Advisors, Inc.

1https://www.cnbc.com/quotes/?symbol=.SPX

2https://www.cnbc.com/quotes/?symbol=.IXIC

3https://www.cnbc.com/quotes/?symbol=.DJI

4https://www.cnbc.com/quotes/?symbol=@GC.1

5https://www.cnbc.com/quotes/?symbol=@SI.1

6https://www.cnbc.com/quotes/?symbol=.DXY

7https://www.cnbc.com/quotes/?symbol=@CL.1

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Home Moving Checklist

So much can go into a home move, and often times, some things can easily be overlooked. While not an exhaustive list of everything that comes up while relocating your home, below is a list of tasks that you should consider both prior to and after your move. For a downloadable PDF click here.

Before Move

  • Work with your financial planner to determine what issues you should consider when buying a new home.
    • Mortgage-related issues
    • Down-payment & closing 
    • Updated cash flow and budget
    • Tax planning
    • Estate planning 
  • Prior to making an offer, go to your new home at different times of the day to get an idea of what to expect.  
  • Purge house for any thing you do not want or no longer use.
    • If you don’t plan on keeping it in your new house, go ahead and get rid of it!
      • For anything you donate, create a list for the purposes of possible deductions when you file your taxes.
      • Many organizations will come to your house to pick up donated items. You may want to consider this – especially for larger items or if you intend on donating enough that will involve multiple trips to the drop-off location(s).
    • Any items that can be sold, consider a pre-move garage sale, or sell items platforms such as Craigslist or Facebook Marketplace.
    • For item that cannot thrown away (i.e., old paint, flammable liquids), drop off at your local household hazardous waste facility.
    • Any food that is not expired in pantry, consider giving to local food bank.
  • If large purchases are going to be made (e.g. furniture) choose a delivery time that coordinates for a day after your moving day.
  • Create a game plan for moving day
    • Begin to stock up on moving supplies.
      • Whether you purchase boxes, moving paper, tape or plan on using whatever you can (Amazon boxes, boxes from friends and family, etc.), once you know you are going to move, it is never too early to start stocking-up!
      • While it is a cost, consider purchasing boxes that are all the same size which will make the packing of a moving truck much easier and efficient. U-Haul, Home Depot, and Lowes are sell moving boxes at a fair price.
    • If you have pets, determine how you will move them.
      • Consider boarding or having someone not assisting with the move watch them. If moving to another city, consider moving pets a couple days before and boarding until you are fully moved in to your new home.
    • Determine what will be moved in moving truck and what will be transported via your own vehicle.
    • Create a floorplan for the move and designate each room and number; pack each box by the room and label each room by a corresponding number (or a system that creates ease and efficiency for moving)
      • For example, your Living Room may be Room 1. The box should only include items designated for as well as have “1” or “Room 1” written on it.
      • For items that cannot be packed in a box (e.g., sofa, bedframe, etc.) tape a piece of paper onto the item with the room number to maintain an efficient move.
      • Whether your hire movers or have family and friends help you move, notify individuals of your system prior to packing up moving truck at old home and before unloading at the new home.
    • Decide if you are going to use movers or Do-It-Yourself (DIY).
      • If you intend on using movers:  
        • Obtain quotes from at least three (3) companies in order to receive a competitive quote.
        • In addition to their price, inquire on other important factors such as numbers of moves, estimated time to move, and whether or not they provide services such as packing boxes.
        • Once moved, check for any potential damages and notify the moving company as soon as possible.
      • If you intend to DIY:
        • Obtain quotes from different rental companies to determine the rental cost and price per mile.
        • Verify with your auto insurance company on coverage extending to rental trucks and trailers. Many times, coverage is not extended, therefore, it will make sense to purchase the additional insurance coverage on the rental.
        • Don’t want a moving company handling your fine china? Consider hiring them for a limited engagement to move large, bulky, and heavy items. You’re back with thank you later. Companies like U-Haul have a list of individuals who will take care of something like this for you.
  • Schedule to disconnect, cancel, or transfer of service for the following prior to closing on old home:
    • Internet
    • Cable
    • Utilities (Water, Power, Gas, Garbage)
    • Home security system
    • Gym
    • __________________
    • __________________
    • __________________
  • Begin the process of transfer of records for the following:
    • Medical, Dental, Vision (if moving location where you will need a new doctor)
    • School
    • Subscription services (Amazon, etc.)
    • __________________
    • __________________
    • __________________
    • __________________
  • Complete a change of address form at your local USPS or online.
    • Once notification of forwarding period is received, make note on your calendar of the last day mail will be forwarded to your new address.

After move

  • Update Driver’s License.
  • Once Driver’s License is updated and copy of deed is received, apply for homestead exemption.
  • Change padlocks on doors; have at least two keys per lock.
  • Change any other locks outside door (e.g. lock on fence, mailbox, etc.).
  • Purchase new garage door openers and reset settings on garage door.
  • Update addresses for the following:
    • Banks
    • Credit Cards
    • Retirement & investment accounts
    • Social Security/Medicare
    • Insurance
      • Home, auto, personal property, life, disability, long-term care, and health
    • Subscription services
    • Cell phone
    • Organizations (especially those that require notification in a certain period of time!)
    • Current and/or former employer
    • __________________
    • __________________
    • __________________
    • __________________
  • Update your voter registration.
  • Confirm that all mail is being forwarded to address; use as opportunity to change address for anything you may have forgotten. 
  • Complete or update home inventory.
  • Create a “We Moved” postcard and send via mail or email to your family, friends, and any other important contacts.
  • Enjoy your new home!

3rd Quarter 2020 Market Commentary

Note: This market review was published on July 15th, 2020 and may not be reflective of current market or investing issues.

The first half of 2020 brought volatility back to the markets that has not been seen in a decade.  Not only did we see the fastest 30% decline in the history of the U.S. equity markets, but in the second quarter, markets staged a nearly equal rally.  As of the end of the second quarter the NASDAQ had reached an all-time high, the S&P 500 came within less than 5%1 of reaching its all time high, and the Dow Jones Industrial Average came within 8% of its all-time high2.  This rally was led by technology stocks and those that facilitate the movement toward a work from home culture in the United States.

The equity market rally in the United States has been faster and stronger than seen in other markets around the world, and has also happened while the economy has suffered some of the worst performance in decades.  Unemployment skyrocketed from less than 5% to more than 14%3, the Gross Domestic Product (GDP) of the United States is expected to decrease by more than 35% in the second quarter4, more than 8.5% of homeowners are currently not making their mortgage payments5.  The U.S. stock market seems to be almost completely disconnected from the real economy.

If the stock market really is so disconnected from the real economy, then what is fueling the markets strength? There are a few things that are going on that are supporting markets. First, is the amount of stimulus being provided by the Federal Reserve Bank (the Fed) and the Federal Government.  Second, the amount of COVID-19 cases may be rising, but the death rate in the U.S. has continued to fall.  Finally, there have been many announcements by pharmaceutical companies like Moderna, Novavax, and Pfizer around treatments and/or vaccines for the Coronavirus.

The stimulus from the Fed and from the Federal Government is already at levels that we have never seen before.  They have taken their overnight lending rate to 0%, as they did during the Great Financial Crisis in 2008, but they have also increased their Quantitative Easing program to include both investment grade and non-investment grade corporate debt.  They have bought billions of dollars of U.S. Treasuries, mortgage-backed securities, and corporate bonds in only a few months’ time.

As states began to reopen from their lockdowns throughout the second quarter of the year, we have started to see a dramatic rise in new cases of COVID-19.  While this is a concerning statistic, there is a silver lining that has helped the sentiment in the stock market, and that is that the fatality rate has continued to decline.  The first few weeks of July will be critical for this, as the number of deaths do tend to lag the number of cases.  If we do not begin to see an increase in the fatality rate, we can expect the trend to continue.

The news that has continued to have the largest effect on the U.S. market is optimism around a vaccine or treatment that is effective against COVID-19.  There are currently multiple companies that are researching a vaccine, and research has shown that Remdesivir (a drug made by Gilead) decreases the severity of the disease and the length of a patient’s hospital stay.  This is important as one of the biggest concerns about this pandemic was that hospital systems may be over-run.  The faster that patients can recover and be released from the hospital, the faster a bed and supplies can be open for another that needs them.

While there has been a lot of good news lately, it is important to remember that there is a lot that we still do not know about this virus and that we will likely not know for months to come.  The fatality rate has come down, viable treatments have been found to decrease the length and effects of the disease, and the economy is beginning to re-open and show signs of life.  We have a long way to go, but for now it looks like the worst may be behind us.

Sincerely,

Longview Financial Advisors, Inc.

1: https://www.cnbc.com/quotes/?symbol=.SPX

2: https://www.cnbc.com/quotes/?symbol=.DJI

3: “Civilian Unemployment Rate,” U.S. Bureau of Labor Statistics, June 2020, accessed July 02, 2020, https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.html

4: “GDPNow,” Federal Reserve Bank of Atlanta, July 02, 2020, accessed July 02, 2020, https://www.frbatlanta.org/cqer/research/gdpnow

5: Adam DeSanctis, “Share of Mortgage Loans in Forbearance Increases to 8.55%: Mortgage Bankers Association,” MBA, June 16, 2020, accessed July 02, 2020, https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Disclaimer

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.


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