Message from Jon

Apologies... 

First off, I am sorry for the last week's issue not being delivered! I failed to click the send button on the system to put it in the queue. With it being rebalancing week and end of earnings week, this mistake slipped by us unknowingly.

 

Market Update

Biden Strongly Considered

We think that Wall Street is now firmly pricing in a Biden Election win. We are seeing confirming evidence to this effect as well with the VIX declining and the indexes responding sharply upward despite the continued problem with Congress not being able to pass a stimulus bill yet. In doing more research over the weekend, I revisited Dr. Alan Lichtman's 13 keys system where the prediction is firmly in the Biden Camp as well.5

For those of you that are unfamiliar with Dr. Lichtman's system, I first spoke about it in 2016 where he was predicting a Trump Election. His system was developed in 1984 and involves 13 keys to winning the Presidential Election.4

He has predicted the last 9 presidents, and what's more interesting is that the keys do not involve the debates, the campaign strength or the Polls, Opinions or Popular Votes. What it fails to consider is the "suppression of the minority vote and sad to say, Russian intervention" this time around.

1. Party Mandate: After the midterm elections, the incumbent party holds more seats in the U.S. House of Representatives than after the previous midterm elections. False.
2. Contest: There is no serious contest for the incumbent party nomination. True.
3. Incumbency: The incumbent party candidate is the sitting president. True.
4. Third party: There is no significant third party or independent campaign. True.
5. Short-term economy: The economy is not in recession during the election campaign. False.
6. Long-term economy: Real per capita economic growth during the term equals or exceeds mean growth during the previous two terms. False.
7. Policy change: The incumbent administration affects major changes in national policy. True.
8. Social unrest: There is no sustained social unrest during the term. False.
9. Scandal: The incumbent administration is untainted by major scandal. False.
10. Foreign/military failure: The incumbent administration suffers no major failure in foreign or military affairs. True.
11. Foreign/military success: The incumbent administration achieves a major success in foreign or military affairs. False.
12. Incumbent (party) charisma: The incumbent party candidate is charismatic or a national hero. False.
13. Challenger (party) charisma: The challenging party candidate is not charismatic or a national hero. True.

(Wikipedia.org/wiki/the keys to the white house) 3

 

What would a Biden victory possibly mean for Wall Street?

Well, in our opinion, with a Biden win, we could possibly see a positive turn in terms of additional Stimulus from Congress. We could see a potential sell-off be overshadowed by the stimulus package, giving way to either a continuation of the rebound or a muted sell-off while the market processes the stimulus.

The tax bill is likely to punish high wage earners, corporations and capital gains. The bill, while not taking place very quickly, may prompt hedge funds, mutual funds, endowments and foundations alongside retail investors to take profit off the table at lower capital gains rates while preparing for higher rates in the future. If enacted, this bill will likely trim off about 10% of the earnings of the S&P 500 resulting in a potential view of being overvalued. This could possibly stall investment and cause a reversal of fortune in the short term. When done in mass, we may have to live through another 4th quarter of 2018 all over again. Worry will get you nowhere though, especially if we see another rebound like we did in 1st quarter of 2019. 

History does not support sentiment

Reacting to this by selling is a bad idea, in our opinion. Despite your personal politics or biases, the markets do better on known monetary policy, federal stimulus and profitable economies.

There is a big difference between what is perceived and what is reality, especially in today's world of fake news, or at best, biased information. According to Blackrock, the stocks' average returns from years 1928-2019 is 11.3% while bonds are 5.5%. "It's the Economy stupid!" is the famous quote by James Carville.1

It's interesting that the majority of voters seem to be unhappy with how the President has handled the COVID-19 pandemic, and since it was the pandemic that stunned and debilitated the personal economies of many in the US, it would make sense that this quote still applies even though indirectly this time around.

Since 1926, open election years have produced a 2.5% average return, while presidential re-election years have returned 10.3%. Even though the history indicates a positive market return, the experience may prove to be disturbing and distressing to many! 2 

Will we shift?

Yes, we will be shifting portfolios but not necessarily for the obvious reasons. We will be looking at what will likely be faring well in 2021 with a new Democratic leadership. We will be using the end of year to rebalance portfolios. Historically, if you compare a periodic rebalance with a buy and hold, the numbers favor a rebalanced approach. We will still be conducting our Best Of Breed Selection Process though, since this has gotten more effective with the additional scrutiny from our CFA.

We will not be looking to avoid the raindrops in a thunderstorm since it is impossible to time the markets. We are, however, ensuring that our systems and strategies remain in alignment with what is happening on Wall Street and in our economy. Tilting in favor of, or away from, is a stronger way to manage risk than an all-in vs all out approach, in our opinion.

Could Trump still win?

Of course, the President could still win. At this point, anything is possible, but few outcomes are probable in our opinion. We are bracing for an elongated period of time where the results are being contested. We are preparing for an increased amount of violence and volatility to unfold on Wall Street while keeping in mind that this is all short-term in nature, while our clients and prospective clients are in it for the long-term. 

2021 will be here before we know it and with it will come new challenges and opportunities.  We will meet those with success when we stick to your plan and focus on what matters most-which is not returns. It is getting account values to where they need to be, eliminating debt as early as possible when it enhances your goals, and making sure you either get a plan or stay on your plan going forward. Stay focused to stay on course!

Till we speak again, enjoy the turning of the leaves!
 

Jon

 

Sources:

1. https://www.forbes.com/sites/kristinmckenna/2020/08/18/heres-how-the-stock-market-has-performed-before-during-and-after-presidential-elections/#6410b9fd4f86
2. https://www.etftrends.com/etf-strategist-channel/2020-outlook-preview-us-election-insights/
3. https://en.wikipedia.org/wiki/The_Keys_to_the_White_House
4. https://www.youtube.com/watch?v=C8FzVistDHY
5. https://www.cnn.com/2020/08/07/us/allan-lichtman-trump-biden-2020-trnd/index.html 

Stocks Rise, Stimulus Uncertain

WEEKLY UPDATE - OCTOBER 12, 2020

The Week on Wall Street

Stocks staged a powerful rally last week, riding a wave of optimism over the prospect of the passage of a new fiscal stimulus bill. The Dow Jones Industrial Average rose 3.27%, while the Standard & Poor's 500 increased 3.84%. The Nasdaq Composite index gained 4.56% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.23%.[1][2][3] 

Stimulus Stalemate? The anticipation of lawmakers passing a new round of economic stimulus was a decisive driver of market action all week.   A mid-week tweet by President Trump announcing that he was ending stimulus negotiations sent stocks lower. Losses were exacerbated by sharp declines in some mega-cap technology companies as details emerged from a House Judiciary subcommittee report on its investigation into their competitive practices.[4]   Stocks quickly reversed direction, climbing after the President tweeted that he would sign a limited stimulus bill, but lawmakers appeared to reject a piecemeal approach.   Stocks consolidated on Friday, helped by continuing stimulus talks and new election polls that suggested that the risk of a contested outcome appeared to be fading.   Small Cap Rally The outperformance of large cap stocks relative to small cap stocks has been both wide and persistent during the last ten years. Last week's action in small cap stocks, as represented by the Russell 2000 Index, indicates that smaller companies may finally be making up some ground.[5]   Last week, the Russell 2000 Index rose 6.33%, outperforming the S&P 500 by 2.4%.[6]   While this outperformance may be fleeting, a potential broadening of the stock market rally may be considered a healthy development.   Final Thoughts This week begins the third-quarter earnings season, with companies from a variety of industry sectors reporting (see below). Early earnings reports start predominantly with the major banks, whose earnings results may provide insight into the general health of American consumers.   As is often the case, company guidance about the future earnings may be of greater interest to investors than past results.    THIS WEEK: KEY ECONOMIC DATA Tuesday: Consumer Price Index (CPI). Thursday: Jobless Claims.  Friday: Industrial Production. Consumer Sentiment.    Source: Econoday, October 9, 2020 The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.   THIS WEEK: COMPANIES REPORTING EARNINGS Tuesday: Johnson & Johnson (JNJ), J.P. Morgan Chase (JPM), Citigroup (C), Blackrock (BLK) Wednesday: Bank of America (BAC), UnitedHealth Group (UNH) Thursday: Morgan Stanley (MS) Friday: Schlumberger (SLB), J.B. Hunt Transport Services (JBHT), Kansas City Southern (KSU), V.F. Corporation (VFC)   Source: Zacks, October 9, 2020 Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.     "A reader lives a thousand lives before they die. The person who never reads only lives one." - George R.R. Martin  Pulled Pork 8 servings Ingredients: 1 teaspoon vegetable oil   4 pounds pork shoulder roast   1 cup BBQ sauce   ½ cup apple cider vinegar   ½ cup chicken broth   ¼ cup brown sugar   1 tablespoon yellow mustard   1 tablespoon Worcestershire sauce   1 tablespoon chili powder   1 extra large onion, chopped   2 large cloves of garlic, crushed   1 teaspoon dried thyme   8 hamburger buns   Butter Directions: Pour the oil into the bottom of a slow cooker.   Add the pork roast, BBQ sauce, apple cider vinegar, chicken broth, brown sugar, mustard, Worcestershire sauce, chili powder, onion, garlic, and thyme. Mix all those ingredients together.   Cook on high for about 5-6 hours or until the roast shreds easily.   Remove the pork from the slow cooker and shred. Return the shredded meat into the slow cooker and combine it into the leftover juices.   Spread butter on both halves of a hamburger bun, toast in a skillet, and spoon pork into the toasted buns.   Recipe adapted from Allrecipes[7]     You Have the Right to Confidentiality   According to the Taxpayer Bill of Rights, the IRS won't share any information that a taxpayer gives with outside parties unless allowed by the taxpayer themselves or the law. This right to confidentiality is one of the 10 rights found in the Taxpayer Bill of Rights. Also included in the confidentiality clause: The IRS can't contact third parties, including employers, friends, or banks, for information without giving the taxpayer reasonable notice first.   The same confidentiality you have with an attorney also applies to tax professionals working with the IRS on your behalf. Confidential communications include conversations, messages, and documents that are considered private or restricted between a taxpayer and their attorney or the IRS. * This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional. Tip adapted from IRS.gov[8]   Try the Mirror Drill   If you find yourself digging into the ground with your club face on impact, chances are that you're using the leading edge of the club and turning it into the ground. This means you're not getting as much loft as you should, which can sabotage your short game.   To fix this problem, try the mirror drill. As you set up for your shot, turn your club so the grooves face up and imagine that there's a mirror there. Throughout your swing, the "mirror" should always face up so you would be able to see yourself in it. This also includes during your back swing. The grooves (or "mirror") should point straight back at you.   Practice this motion of keeping the club face open until it becomes natural, then follow through with your swing while keeping your "mirror" facing up. This will help you make better contact with the ball and improve your strike. Tip adapted from PGA of Australia[9]  Get Lost in a Book for National Book Month   Did you know that October is National Book Month? There's no better time to get lost in a great story because not only is reading entertaining, but there may also be some health benefits to getting lost in a good book, as well.   Here are some potential health benefits of reading: Reading may bring existing neural pathways in the brain to life and help the brain remain elastic and active.   Reading may decrease mental decline, especially for older adults.   Reading may improve short-term memory and recall capabilities.   Reading may reduce stress and depression   Reading may help you fall asleep when used as a bedtime ritual. But, this only applies to reading real books, not e-readers or tablets. Reading may have health benefits for people of all ages, from children to older adults!   Tip adapted from Business Insider[10]   Swap Out These Three Items for a Greener Kitchen You don't have to go entirely waste-free to make some beneficial and eco-friendly changes in your kitchen. Just a few substitutions can go a long way towards making your kitchen healthier for you and the environment.   Here are three items you can easily swap out to help make your kitchen greener: Replace single-use plastic containers with glass. Single-use plastic can be found everywhere in your kitchen, from your dish soap to foods in your pantry and fridge. Replace pasta sauce and drink containers with glass instead. Glass containers can be reused in your kitchen afterward or recycled.   Turn old t-shirts into cleaning towels. Don't throw your old t-shirts away, but give them a second life as cleaning towels. Use them to help keep your kitchen clean without using disposable sponges or paper towels.   Use what you have until it wears out. Rather than replacing all your existing plastic containers and water bottles with glass or eco-friendly options, use what you have until it wears out. Then feel free to replace them with more environmentally friendly options. Get creative! What else can you do in your kitchen to make it more environmentally friendly?   Tips adapted from MyModernMet.com[11] Share the Wealth of Knowledge!   Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!     Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.   Diversification does not guarantee profit nor is it guaranteed to protect assets.   International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.     The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.   The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.   The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.   The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.     The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.   Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.   Past performance does not guarantee future results.   You cannot invest directly in an index.   Consult your financial professional before making any investment decision.   Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.   These are the views of Platinum Advisor Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial professional for further information.   The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.  [1] The Wall Street Journal, October 9, 2020 [2] The Wall Street Journal, October 9, 2020 [3] The Wall Street Journal, October 9, 2020 [4] CNBC.com, October 6, 2020 [5] The Wall Street Journal, October 8, 2020 [6] The Wall Street Journal, October 9, 2020 [7] Allrecipes.com, October 9, 2020 [8] IRS.gov, October 9, 2020 [9] YouTube.com, October 9, 2020  [10] BusinessInsider.com, October 9, 2020 [11] MyModernMet.com, October 9, 2020 Summit Financial Group Summit Financial Group of Indiana 4050 Britt Farm Dr Suite C Lafayette, IN 47905 866-582-5721 jon@summit-fp.com http://www.summitfinancialgroupofindiana.com Copyright © 2020. All Rights Reserved.

Securities offered through Regulus, LLC. Member FINRA/SIPC. Investment advisory services offered through Regal Investment Advisors, LLC, an SEC Registered Investment Advisor. Registration with the SEC does not imply any level of skill or training. Regulus and Regal Investment Advisors are affiliated entities. Summit Retirement Advisors, LLC and Summit Financial Group of Indiana are affiliated entities. Summit Retirement Advisors, LLC and Summit Financial Group of Indiana are independent of Regulus and Regal Investment Advisors.