Connect with us

Finance

Brutal First Quarter For Stocks Comes to End, Here’s What’s Next

Avatar

Published

on

Brutal First Quarter For Stocks Comes to End, Here’s What’s Next

All three major indexes ended Tuesday in negative territory, with the S&P 500 slipping 1.6%, the Dow Jones Industrial Average falling 1.84% and the Nasdaq dropping 0.95%.

Mercifully, the first quarter has come to an end, so we can start to put the post-Feb 19th carnage into some context.

The Dow has plunged 23.2% since the start of the year, it’s worst first-quarter performance in history, and single worst overall quarter since the fourth-quarter of 1987 when it plunged 25.3% during the Black Monday crash.

The S&P 500 is down 20% so far this year, it’s largest quarterly decline since the 2008 financial crisis. It’s also the first time in more than a decade that the index started the year losing ground in each of the first three calendar months. The S&P was down 0.2% in January, 8.41% in February and 13.1% in March. That’s only happened seven other times in the indexes’ 63-year history.

The Nasdaq closed out the quarter down 14% since the start of the year.

Stock weren’t the only investments getting pummeled, oil turned in a particularly gruesome report card for the quarter as well.

Prices for West Texas intermediate crude (WTI) futures saw their largest single-quarter decline in history to start the year, with prices dropping more than 65%. In March alone the number of oil contracts fell 54%, also a record for a single-month.

While nearly all of this volatility in stocks is a result of the coronavirus outbreak (oil’s decline is also due to a price war between Saudi Arabia and Russia), the fallout from the pandemic is expected to dramatically affect our country’s gross domestic product (GDP) in the coming quarters.

Yesterday Goldman Sachs said that the second-quarter U.S. economic decline would be much greater than it had previously forecast. The bank says it expects higher than anticipated unemployment figures and “sky-high jobless claims numbers” because of the coronavirus pandemic.

It’s also forecasting a real GDP sequential decline of 34% for the second quarter on an annualized basis, significantly higher than its earlier estimate of 24% drop. Also concerning is that the bank now sees the unemployment rate hitting 15% by mid-year compared to its earlier estimates of 9%.

Looking Ahead

When the market is volatile like it has been for the last month or so, it’s often hard to imagine brighter days ahead.

But when you look at the market’s historical performance immediately following a significant decline like we are seeing right now, there are reasons to be optimistic.

According to Dow Jones Market Data, after the Dow has turned in a quarter as brutal as the one we just went through, the index returns 11.88% and 8.49% in the following two quarters.

And over the course of the following year, the Dow returns 22.75% on average.

For the S&P 500, the two quarters following a massive decline return 12% and 15.8%, and a year later the index is up 27.79% on average.

And the Nasdaq returns 3.79% and 5.57% over the next two quarters and 9.54% over the following year.

So while nothing is guaranteed, it appears we can look forward to better returns ahead.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

4 Ways To Lower Your Taxes In Retirement

Avatar

Published

on

4 Ways To Lower Your Taxes In Retirement

With the likelihood of higher taxes in the future, it’s important to do as much planning as you can today to minimize your taxes during retirement. While nobody knows what the future holds, taxes generally go up over time, meaning even in retirement you could be faced with significant tax bills.

Fortunately, there are steps you can take today to help minimize your taxes in the future. Here are four ways you can help lower your taxes in retirement.

1. Know the Difference Between Each Retirement Account

401(k)s are tax-deferred. You contribute pre-tax income, and your employer may match your contributions up to a certain percent. When the time comes to start withdrawals, the money will be taxed as ordinary income. You can invest up to $19,500 in a 401(k) for 2020, plus an additional $6,500 catch-up contribution if you’re over 50 by the end of the tax year.

Roth 401(k)s are tax-free. Unlike a traditional 401(k), you fund a Roth 401(k) with after-tax dollars. This means your withdrawals are tax-free and penalty-free, as long as you’ve had the account for five years and are at least 59½. As an added benefit, there are no income limits on Roth 401(k)s. It makes this type of retirement account an attractive option for high-earners.

IRAs, or individual retirement accounts, are tax-deferred. Your withdrawals in retirement will be taxed as ordinary income. You can contribute up to $6,000 in 2020, plus a catch-up contribution of $1,000 if you are 50 and older.

Roth IRAs are tax-free. Because you contribute after-tax income now, you get tax-free withdrawals in retirement.

2. Know What Type of Investments Should Go Into Different Accounts

Investments That Should Go In Taxable Accounts: Index funds, ETFs, buy-and-hold stocks and tax-exempt municipal bonds should be held in taxable accounts.

Investments That Should Go In Tax-Free Accounts: Fixed income, REITS, commodities, liquid alternatives and other actively managed investments should be held in tax-deferred or tax-free accounts so you can grow the account without paying taxes along the way.

3. Prepare Now For Required Minimum Distributions

Under the CARES Act, all RMDs have been suspended for 2020. But you should plan for them to be reinstated at any time. If you have a 401(k) or a traditional IRA, you’ll have to start taking required minimum distributions (RMDs) every year.

If you turned 70½ in 2019 or earlier, you may have already started to take your first RMD by April 1 of the year after you reached 70½. For the rest of us, if you turn 70½ in 2020 or later, you can now wait to take your first RMD by April 1 of the year after you reach 72. To make sure you comply with the complex rules, our advice is to consult with your financial professional.

4. Consider a Roth Conversion

If you have a year with a particularly low-income level compared to normal, consider doing a Roth conversion. The conversion is a taxable event, so you’ll face a higher tax bill the year you convert, or you can slowly convert your accounts over a few years to help break up the tax implications. Critically, by converting to a Roth, any future withdrawals will be tax-free. Additionally, Roth IRA’s have no RMDs, so you aren’t forced to withdraw money every year.

All of these tips involve your retirement account, so consult with a financial or tax professional to make sure any of these changes are best for your individual situation.

Up Next:

Continue Reading

Business

President Trump’s Executive Orders A ‘Real Game-Changer’ For The Country

Avatar

Published

on

President Trump’s Executive Orders A ‘Real Game-Changer’ For The Country

President Trump was busy over the weekend, signing four executive orders to provide the financial stimulus that America needs. Trump said the Democrats, including House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, held the “vital assistance hostage” as negotiations stalled.

“We’re doing that without the Democrats,” Trump said. “We should have been able to do it very easily with them, but they want all these additional things that have nothing to do with helping people.”

“Through these four actions, my administration will provide immediate relief to Americans struggling in this difficult time,” he said. “The beautiful thing about this difficult time is we’re coming back and setting records.”

Stephen Moore is a member of President Trump’s economic recovery task force. He said the orders were “a real game-changer” for the president.

“All of a sudden Trump has flipped the table on Nancy Pelosi. Those negotiations were going nowhere.” said Moore, an economist at FreedomWorks, during an interview yesterday on “Fox & Friends Weekend.”

The Goals of Trump’s Executive Orders

The executive orders by the President aim to help directly address the damage the coronavirus pandemic. It also aims to ensure that millions of Americans have the resources they need.

Among the executive orders signed by Trump were $400 per week in unemployment benefits. This will replace the $600 per week that expired at the end of July.

Moore said during his “Fox and Friends Weekend” interview that he isn’t a fan of extending the benefits, and believes “we should go back to the old unemployment insurance system.”

He did acknowledge, however, that “$400 is a lot better than $600.”

“We have a situation right now where about two out of three workers who are unemployed are getting paid more money than the people who are working,” Moore said on Sunday, following his article for Fox Business where has said he believes the extra unemployment benefits are “a disincentive to work, but provides an immediate safety net for the 25 million Americans who are still unemployed.”

In addition to the unemployment insurance benefits, Trump also signed measures to halt evictions. He also approved measures to eliminate the payroll tax through the end of the year and defer student loan payments.

The Potential of the Actions

“Through these four actions, my administration will provide immediate relief to Americans struggling in this difficult time,” he said. “The beautiful thing about this difficult time is we’re coming back and setting records.”

By eliminating the payroll tax, Moore says “every single worker in America,” including “the real heroes of this economy,” like the first responders and truckers, will get “a much deserved 7.5% pay raise starting immediately.”

“That is a very, very positive thing,” Moore then added.

White House economic adviser Larry Kudlow said the average person would save about $1,200 over four months beginning in September.

“With respect to the payroll tax, basically we’re giving 140-some-odd million people who worked through this pandemic, they’re heroes, we’re giving them about a $1,200 wage increase after tax,” Kudlow said.

Up Next:

Continue Reading

Business

SPACs Are Red Hot, Here’s One You Probably Want To Avoid

Avatar

Published

on

SPACs Are Red Hot, Here’s One You Probably Want To Avoid

Last week we discussed SPACs, or special purpose acquisition companies, the red-hot investment trend that has taken off like a rocket this year.

According to Renaissance Capital, in just the last 9 days, 14 SPACs have filed to raise a sum of $5.5 billion. Year-to-date, there have been 57 SPACs created and combined they have raised $21.3 billion in the IPO market. This includes Bill Ackman’s $4 billion Pershing Square Tontine Holdings Ltd.

For comparison, last year a total of 59 blank check companies raised $12.1 billion. This was considered a record at the time. So with almost four full months left this year, we’ve nearly exceeded last year’s total.

“We’re about to break last year’s full-year SPAC IPO count of 59, the highest number in a year ever. And based on recent filings, activity is only going to increase heading into the fall,” said Matthew Kennedy, a senior strategist at Renaissance Capital.

We pointed out a few promising SPACs in last week’s article. However, a recent filing is one that you definitely want to avoid. It also highlights the importance of doing due diligence before you invest.

Investing in SPACs Wisely

A company called Burgundy Technology Acquisition Corp. filed a preliminary prospectus last week. It said it is looking to raise $400 million. Burgundy will be led by former Hewlett-Packard and SAP AG Chief Executive Leo Apotheker. Apotheker will also be co-CEO of Burgundy along with former SAP colleague James Mackey.

Unless you are a student of Hewlett-Packard history, you likely don’t remember the tenure of Apotheker, which only lasted about a year. That’s because while he was CEO, Apotheker oversaw what many consider to be one of the worst, if not the absolute worst, acquisitions in corporate history.

Hewlett Packard acquired a data analytics software company called Autonomy for $11 billion. Before the deal even closed, Chief Financial Officer Cathie Lesjak expressed concerns about the hefty price, yet Apotheker pushed on to close the deal. There were even concerns about Autonomy’s aggressive accounting tactics.

The end result is that Apotheker was fired a little more than a month after the deal was closed and Hewlett-Packard wrote off $8.8 billion of the purchase price less than a year later. The company admitted it had substantially overvalued Autonomy, and nearly a decade later, lawsuits are still pending over the acquisition.

Most appalling, in his testimony as part of the numerous lawsuits, Apotheker admitted that he never bothered to read Autonomy’s most recent financial results before signing the deal, which lawyers pointed out would have taken him about 30 minutes.

“I was running a $125 billion company, sir, and minutes are pretty precious,” Apotheker testified.

Now he’s back, hoping to have a $400 million blank check to go looking for a company to acquire.

This time around, will he take the time to read financial statements?

Up Next:

Continue Reading
Advertisement

Facebook

Trending

Copyright © 2019 The Capitalist. his copyrighted material may not be republished without express permission. The information presented here is for general educational purposes only. MATERIAL CONNECTION DISCLOSURE: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to from this page and may receive commissions from purchases you make on subsequent web sites. You should not rely solely on information contained in this email to evaluate the product or service being endorsed. Always exercise due diligence before purchasing any product or service. This website contains advertisements.

[email]
[email]