July Newsletter – The Pandemic and the 2020 Election

Contributors: Dr. David Kelly, Chief Global Strategist and Head of the Global Market Insights Strategy & Meera Pandit, Market Analyst


Since the start of the year, the backdrop for the 2020 election has shifted dramatically, as the next administration’s policies will shape the economic recovery and build the foundation for the next expansion. Historically, incumbent presidents have won reelection unless there was a recession during their term. Now, amidst a deep recession and the highest unemployment rate since the Great Depression, President Trump will either have to convince voters he has managed this crisis appropriately, driving the reopening of the economy, or rely on his signature issues such as immigration, trade protectionism and infrastructure. While signature issues may resonate with his fiercely loyal base, economic realities could be more decisive in swing states.

Meanwhile, presumptive Democratic nominee Joe Biden is likely to emphasize his experience as vice president in the aftermath of the financial crisis, campaigning on helping the average American worker and reducing inequality by enhancing the Affordable Care Act, alleviating portions of student debt and proposing a corporate tax hike to 28% from 21% currently. One issue both appear to agree on in principle, although perhaps not in implementation, is being tough on China, which is supported by both Republican and Democratic voters. This could lead to an even tougher trade stance, diverting supply chains, reducing investment and imposing restrictions on technology.

The first half of the next presidential term will be squarely focused on rebuilding the economy. Infrastructure investment, which has bipartisan support, could be a key part of this. However, once the economy stabilizes, the government will have to tackle massive federal debt and a deep budget deficit, which, in conjunction with easy monetary policy, could cause an inflation spike, forcing higher rates and making debt expensive to service. Unpopular decisions may have to be made to raise taxes or cut spending to restore federal finances. From an investment standpoint, the election itself should not change how investors are approaching the market. Although typically returns are lower and volatility is higher in election years, this is skewed by recessions and market events, such as the tech bubble in 2000 and the financial crisis in 2008. Returns and volatility in 2020 will almost certainly be attributable to COVID-19, not the political campaigns quietly existing alongside it.

How to Put the Hard Financial Lessons of Quarantine to Work for You


Wait – gas cost how much?! This is a question we may ask our parents or hear from our kids with some incredulity. This intergenerational conversation has a humorous side: gas was a quarter a gallon – how? You must have filled up everyday! If we’re thinking, though, the conversation turns to the fact that you made $14,000 a year even at the best job, and so the fuel prices look a little more normal.

We find ourselves in somewhat similar circumstances now. The virus, and the economic shutdown to follow, have changed the financial gravity in the world, sending prices in all directions. As money-smart people, we need to wisely surf these changing tides, rather than be blown about by them.

Let’s look at how, even in disorienting circumstances, we can still keep a strategic hold on our finances and align our financial plan with our goals and values.



Financial awareness is vital in times like these. Jumping at “deals” or jumping back from necessary purchases in a fluctuating economy will often bring you up short. In your everyday life, realize that the money you save on X will probably need to be used to purchase Y.

Look at some surprising prices in the market:

·       Gas: $2.90 (March) as opposed $1.80 (April)

·       Chuck roast: $5.24 (Spring 2019) as opposed to $5.78 (Spring 2020)

·       Eggs: $0.94 (March) as opposed to $3.01 (April)

As you can see, prices are up and down, for a variety of reasons. You’re saving money on gas and spending it on eggs.

At home, too, prices are getting mixed reviews. Streaming subscription services – Netflix, Hulu, ESPN+, etc. – are a drip drain on finances and the more disciplined among us might have cut them. But then you have kids home all day with no school to go to and limited outlets for entertainment. Unless you want to drive each other crazy, they might need to stay current on Riverdale or Spongebob.

The kids don’t need their school lunches or restaurants as often. The kids stay home all day and eat. Toilet paper is cheap, but everybody is home all day so the bathroom has more traffic than ever.

Take this to the global level, and it’s even more complex. Many of us celebrate driving gas prices, but that usually means bad news for the overall economy. It likely means job loss all along the supply chain, and retail losses at the store down the street.

On a larger level, think of an example like a 401(k) – maybe you’re tempted to lessen contributions to free up cash right now. But stocks are down at the moment, which means that your dollar goes further in the market. Keeping your contributions means purchasing more shares and when the economy recovers that could mean nice gains for your portfolio. As disorienting and anxiety-provoking as financial planning can be during the pandemic, don’t let today’s emotional binging turn into tomorrow’s financial hangover.



In uncertain times, it’s often best to go with what you know. Is your financial plan, and better yet, your actual financial behavior, in line with your values and goals? Said another way: We don’t know what the economy is going to do right now – last week’s good news can become today’s cautionary tale pretty quickly. When we can’t project the numbers with any hope of accuracy, sticking to the plan, goals and values we do know is our best hope.

Here’s a hypothetical. Phillip Anthropy gives $500 a month to his favorite nonprofit. His portfolio hit major losses at the beginning of lockdown. In a rush to balance out lost revenue, Phil pulls his donations and ties up the money elsewhere.

On the other side of town, the nonprofit has instantly lost $6,000 in revenue for the year. They now have to trim down their summer internship program, which means losses for their relationship with the university. Thus, the snowball rolls on.

Months later, Phil’s portfolio jumps back up and he finds himself regretting the choice he made about his donations. He’s left with remorse about panic rather than sticking to his plan, and his tax efficiency suffers for the year because of his higher income.

Now, imagine 20 “Phils” all doing the same thing. Now imagine 20,000.

Check your alignment. On the macrolevel, even financial devastation like what we saw in 2008 passed in less than two years. The economy is changing routinely, but your values and your plan can remain stable.



Under pressure, the essentials usually become more clear. The economic pressure right now, even if it’s based more on emotion than the balance sheet, can send your mind to what matters the most.

What is becoming clear? You want to keep the 529 Plan in place for the kids, so maybe you could reallocate from the vacation fund. You want to maintain that 401(k) contribution, but maybe you need to ease up on Christmas this year.

Or maybe the virus drew your attention to something that needs work in your portfolio. Maybe you’re into middle age, watching some friends retire, and seeing that your retirement plan needs to be tightened up. The uncertainty of the markets in just this short time shows us how quickly things can change and makes sequence of returns risk all the more real.

What has the virus and quarantine articulated for you? Where does it draw your attention? Rather than distraction, you can choose focus. Rather than anxiety, you can choose articulation.

Ask yourself:

  • Where am I in my financial life journey? Is retirement getting close – am I ready?
  • Taxes are low right now and required minimum distributions are on a temporary hold; is a Roth conversion a good option?
  • How long will emergency funds and other accounts last you? Can you wait out a downmarket instead of making quick decisions?
  • If you’re at the beginning of your wealth-building journey, remember that you won’t need access to those retirement accounts for another decade, maybe longer. The market always corrects, and almost always quicker than you think. Are you feeling anxiety that largely isn’t relevant to your situation?


No Such Thing as Recency

Awareness, alignment, articulation – these are the gifts of this strange year. How will you put them to work for you?

It’s time to watch for recency bias – the impulse to believe the next circumstance will develop just like the most recent one. That won’t work – these are circumstances like none of us have ever seen. We don’t know what the next quarter will bring, and “global pandemic” isn’t a typical economic forecast category.

Now is the time to make sure your plan is clear and lined up with who you and what you want for yourself, your family and the greater community. Panic will get you nowhere, but acting like nothing’s happening doesn’t help either. Financial planning during the virus takes not only clever technology and research, it takes wisdom.

Feel like you need to review or update your plan? Let us know and we can schedule a time for a review planning meeting!



Regulation Best Interest Notification

In the coming weeks our broker-dealer, Cetera, will be sending you a letter containing a new disclosure document called a Customer Relationship Summary (Form CRS), as well a Supplemental Disclosure document.

They are for your information only; you do not need to take any action when you receive these documents. They are being sent to you as part of a new regulation passed by the Securities and Exchange Commission (SEC) known as Regulation Best Interest, which went into effect on June 1, 2020. Regulation Best Interest requires all broker-dealer firms like mine to let their clients know who we are, the services we provide, how we are paid, and if there are any conflicts of interest in connection with the services we provide to you.

Rest assured our relationship remains as it always has been, and nothing has changed because of this new disclosure. Please feel free to call to discuss any questions you may have. As always, thank you for the trust you have placed in us as we work together to pursue your financial goals.



Did You Know:


– The nation’s 13.3% jobless rate as of 5/31/20 (released on Friday 6/05/20) would have been an estimated 16.3% if the workers who were being paid wages from funds obtained through a “Payroll Protection Program” (PPP) loan were counted as “temporarily laid off” instead of “actively employed” (source: Bureau of Labor Statistics).



– The Fed was purchasing $75 billion per day of Treasury bonds in mid-March 2020 when it launched “Unlimited Quantitative Easing.” The daily debt purchases made by the Fed have slowed, dropping to just $4.5 billion per day of Treasury bonds acquired last week (source: Federal Reserve).



“Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.” 
– Martin Luther King, Jr.

“Understand this, my dear brothers and sisters: You must all be quick to listen, slow to speak, and slow to get angry.” James 1:19


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