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Quarterly Client Letter
October, 2020
Dear Michael,

Your Account Information, Reports, and Stored Documents (including Billing Statements once processed for this quarter) can be accessed by clicking on the following link:
Once the login screen comes up, enter your email and password as usual. You will see your Dashboard summary and can use the tabs to see more detailed views of your accounts.

Also note that all reporting and account information (including Billing Statements) will only be provided through the above portal. If you are not currently set up please contact me soonest to ensure you have proper access.
As the Election Approaches, Markets are Calm
... but how will they respond to the winner?
Markets have been buoyed by hopes of another stimulus package out of Congress. It looks close but I am doubting the Senate will support plans negotiated by House Speaker Pelosi and the White House. Thus it is unlikely to see another stimulus package before November 3rd. However with continued high unemployment and a weak economy, ultimately Congress must pass more fiscal stimulus. Unfortunately the Fed had done about all is can with monetary spigots wide open.

While we will undoubtedly see higher volatility around the election (and perhaps for weeks afterwards until we know the winner), I am expecting markets will continue to grow and have thus opted to be invested about 80%. However, the character of the growth might look significantly different for a Biden win vs than for a Trump win. With Trump we likely will continue see strong performance in narrow areas of the markets. I expect if Biden wins we will see a more muted growth but a broader market response.

Below you will find the link to the mABC Quarterly Commentary which does an excellent job of addressing the latest news about the pandemic as well as impacts on markets. In this edition we covers the following:

  • A summary of the 2nd Quarter 2020 in "Global Market Performance" 
  • A review of "Coronavirus Update" 
  • A look at Election impact in "Vote-atility: The US Presidential Election"
  • A look at Debt Markets in "Debt Issue, Rates Tissue"
  • An outlook for the future in "Look Ahead"

Read more by clicking: 3rd Quarter 2020 Commentary
The table below shows the approximate percentages for your accounts in each asset class as of the date of this newsletter. You might have noticed trade notifications as I moved into and out of the market during the quarter. In general I have been putting protective stop orders when invested to exit the market if we experience another major drop like we saw in March.
  • Fixed Income Investments (now PIMCO Total Return PTTRX) serves as a counter balance to equity investments. I recently transitioned accounts from PIMCO Income Fund to PIMCO Total Return fund which served as a better diversifier in the March 2020 downturn.
  • Equity investments are currently in the broad global indexes ACWI and ACWV. Moderately Aggressive accounts also include selected sector and other specific asset class investments that I expect will perform better in upcoming market conditions.
  • Smaller accounts (less than $10,000) are invested in diversified funds AOA and AOM which hold a mixture of equity and fixed income funds. 
So what's the outlook? 
Much as last quarter, I believe the market will cautiously continue to churn higher if Congress comes through with more stimulus and the Fed continue to be supportive of businesses and employees impacted by the virus. Remember, markets are a forward looking mechanism, typically pricing the market based on what the next 6 - 18 months is expected to bring. However, Congress has not yet reached a deal on extending unemployment benefits and other aid to the un/under employed. Failure to provide fiscal support could lead to a return of Recession.

I know many folks don't like the government just "handing out money" but in times like these, think of it as an investment: pump cash into the hands of those who will spend it (vs saving it) which will then drive consumer spending, which will support businesses, which will generate sales tax locally to support local governments and will generate jobs to employ more people who will pay more income taxes and will generate more business profit who will pay more business income taxes. Thus the "investment" by the government will be returned via more broadly shared tax revenue over time. Oh, and the price of stock will of course rise, benefitting your portfolio!

Several vaccines appear to be on the horizon and the government is "pre-investing" in manufacturing the millions of doses necessary to begin treating the general public. Likely by the end of the year, several vaccines will be approved however then the uncertainty turns to how do you deliver to vaccines to the masses, and will people be willing to get vaccinated? 

As always, I will continue to monitor markets and make adjustments to your portfolios as conditions warrant. And I am happy to discuss our respective views in general and your account and investment needs specifically.
Michael.Andries@mABCLLC.com
+1.713.777.0260