Registered Investment Advisor
900 Walt Whitman Road, Suite 208
Melville, NY 11747
 (631) 923-2485
Investment Newsletter - Q2 2020

We hope this finds you well. The past few weeks (yes, hard to believe that it has only been a few weeks), has been a time unlike anything that we have exactly experienced before. The Coronavirus falls under the category of a "Black Swan Event". Black swan events are characterized by their extreme rarity, their severe impact, and the widespread insistence that they were obvious in hindsight. However, like other times that we have faced black swan events, (2007-2009 financial crisis, worst in 70 years; tech bubble bursting 2000-2002 with 9/11 and anthrax in the middle of that), we will get through this and we do look at market history to give us some signs of what we can expect. While it is impossible to predict exactly how long it will take to get through this period, we do know that this will pass and the economy will eventually reopen and recover. In this newsletter we have a few pieces to help give some various perspectives on what we are going through.

Specifically regarding the economy and the stock market, we give you our thoughts, specifically on the past quarter and outlook further below. If you would like, we also have a link to the Q2 2019 Global Market Outlook by Russell Investments, click here*. *Please note, when you click, you may need to wait about 5 seconds for the screen to load, and then scroll and click the url underneath the Russell Investments picture.

In this issue of our Investment Newsletter:

  • Required Minimum Distributions suspended for 2020

  • An overview of recent market activity, along with Our Perspective...

  • A recap of the performance of major market indices from the past quarter 

  • Access to our updated ADV brochure for year-end 2019

  • Investing during periods of fear

  • Upcoming Economic Calendar

You will find past investment articles, by clicking the Articles tab above, or directly on our website, found under Periodicals. 

If there is a topic of interest you would like to see covered in the future, please reply back to this email to let us know, or  click here . Likewise, if you have any questions on this or anything else, feel free to reply back.
Investment Topic

For our investment topic, " Market Corrections: How Much Impact Do They Have? " we attempt to give a high-level overview of the topic. To learn more, please click here
Required Minimum Distribution rule suspended for 2020
As part of the newly signed Coronavirus Bill, Required Minimum Distributions (RMD's) have been suspended for 2020. All RMD's have been suspended, including those for traditional IRA's for those over age 70 1/2 and also including inherited IRA's, and 401(k)/403(b) plans as well. 

Why were distributions waived? There are many people who do not rely upon the income derived from their RMD's, and it just forces them to withdraw money during a period where asset values have fallen, and pay tax on those distributions. So by not mandating it, it can be a form of economic relief for those individuals. 

How do I make the decision if I should continue or suspend my RMD's for 2020? Well if you fall into some of the conditions below, you may opt to avoid/suspend RMD's for 2020:

1. Do not need or rely on the income from the distribution. 
2. Would like to defer tax longer on investments for larger potential growth.
3. Prefer not to potentially have to sell assets during a market decline to raise the cash to distribute. 
4. Do not want to pay extra tax than is required. 

If you have already taken some funds out as part of a monthly systematic distribution, you have up to 60 days to return a distribution to an IRA or deposit it in another qualified retirement account without owing taxes on it. If within the 60 days, you can only do 1 rollover per 52 week rolling period, but you may be able to get at least one distribution back into the IRA account. 

If the effects of the pandemic dropped you into a lower tax bracket, it might make sense for you to take the RMD (and perhaps a bit more) out of the IRA this year while you are in a lower tax bracket.

If you rely upon your RMD's to live off and supplement your retirement income, you can still continue business as usual and keep taking those distributions. While you may not technically be "required" to take them, you may still want and need to.  

As with most topics in financial planning, one size does not fit all. If you have questions or would like to discuss your specific circumstances in more detail, please just let us know and we will be more than happy to have that conversation. 
Our Perspective on Recent Market News and Activity
Our synopsis of the past quarter, a look ahead, and putting it all in perspective:
The health of all Americans is always the first priority during this global pandemic. As investors however, the health of American’s investment portfolios is also something that garners a great deal of concern as well. This year, March came in like a lion, and unfortunately left like a bear! It took only 22 trading days for the S&P 500 to fall 30% from its record high reached on February 19 th . This was the fastest drop in the history of the market. Faster than the 1987 market crash, faster than even the 1929 crash. Daily swings in the market have been as much as 8-12%. Does it make sense that the worth of any company should fluctuate up or down by these percentages over a 24-48 hour period? Of course not. The COVID-19 virus has stalled the incredibly strong economy that we were enjoying and made a global recession more likely. The virus is the perfect example of what is known as a “Black Swan Event”, which unfortunately does happen periodically. Hopefully, if history is any guide, we will not see another one for quite some time. The challenge is trying to predict what the duration of this virus pandemic will be? The new guidelines just announced are that the country should stay in self-isolation now through April 30 th . The key question is, “Is the negative news to come better or worse than what is already priced into the markets?  The markets will make their own determination and will not wait for news to get better before starting their recovery. Investors will have to look past the immediate bad news to come. Will there be a possible V shaped recovery, a U shaped recovery, or an L shaped recovery? Policy stimulus, pent-up demand and a lack of major imbalances argue for a solid upswing when the threat of the virus eventually clears or there is some positive medical news as to treatments.   

The coronavirus has led to a sudden shutdown of large parts of our economy. We won't know the depth or length of this until we see results of the actions that are being taken today to try to improve the situation. Most important in the short term, is the goal to come up with successful therapeutic treatments that can reduce this deadly virus to something like a mild case of the flu or even better. This would allow for a gradual return to some elements of business as usual. Improved and easier testing will also be vital to allow for prevention and for Americans to be able to get back to work.  

But like prior bear markets in 2008-09 and 2000-2002, the economy and the stock market will eventually recover. The stock market looks to the future and usually turns up before we are recovering from a recession. If we look forward to next year, the economy is likely to be growing and stocks will have moved up before that. Sound advice is that while it can be painful to ride out this drop in prices, to simply ride through this and wait for the recovery. Any attempts to try and time the market if one is truly a long term investor can potentially lead to a bad outcome due to missing some of the best market moves early in a recovery. Diversified portfolios are designed to be less volatile than a portfolio of all stocks and allow us to maintain positions until the economy and markets recover.

The Federal Reserve has been very proactive, utilizing lessons learned throughout other bear markets, and especially some lessons during the Financial Crisis of 2007-2009. The Fed has taken many steps to provide massive amounts of liquidity into the financial system. Congress and the President negotiated a historical fiscal stimulus program to inject trillions of dollars as well. These actions will help reduce the economic impact of the coronavirus and help facilitate a recovery later in the year.

Coronavirus Aid, Relief, and Economic Security (CARES) Act:

In response to the economic damage caused by the Coronavirus, Congress has passed a massive emergency fiscal stimulus package in the amount of $2.2 trillion.
This legislation offers benefits aimed to assist many entities including individuals, businesses, healthcare providers, state and local governments. Some key elements:

For retirees, Required Minimum Distributions (RMD’s) are suspended for 2020. This does not mean that you can’t take out funds, but you are no longer required to. This is an individual case by case discussion for our clients in RMD status.

For Individuals under 59 ½ the 10% penalty if waived for withdrawals. 

Cash payments: Most individuals earning less than $75,000 can expect a one-time cash payment of $1,200. Married couples would each receive a check and families would get $500 per child. That means a family of four earning less than $150,000 can expect $3,400. The checks start to phase down after that and disappear completely for people making more than $99,000 and couples making more than $198,000. 

It has certainly been an exhausting last month or so for all involved. Due to the state requirements, we are each working from our home offices and are available for any of our client’s calls or questions. We can even arrange group calls or video conferences for anybody who would like to have a meeting. Hopefully by May, we will be able to start to return to life as we once knew it. In the meantime, stay safe and healthy, try and think only positive thoughts, do not watch too many hours per day of the daily news because it will be very sad, and we look forward to getting past this difficult time and getting all of our lives back to normal.  
Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
Major Market Indices
Below is the Q1 '20 price return performance of some of the major indices:
Our Annual ADV
As per Securities and Exchange Commission (SEC) requirements, attached is our annual ADV brochure.  To access this, please  click here .  If you would like us to email or mail a hard copy, please feel free to call or email us to let us know.
Investing During Periods of Fear
In the midst of the recent market volatility, investors often become understandably emotional. However, we think it’s important to address some of these concerns that investors often have during such events, which are often based entirely on emotion rather than data and what is actually happening.   

Isn’t investing just like gambling?

One such concern is the notion that an investment portfolio is little more than gambling in a casino.  While this may seem so to the novice investor, it is in fact precisely the opposite. 

When you enter a casino to play a game of chance, you may very well make money in the short term. However, if you choose to stay there long enough, you will eventually lose. The reason is simple enough. The odds are mathematically against you. The odds are always in the house’s favor, making a stay at a casino little more than entertainment.  

 Investing is precisely the opposite. When you build an investment portfolio, you essentially become “the house”.  While you may have a bad couple of months, or even a year or so, the odds are always in your favor. The longer you are invested, the better your odds become. This presumes, that you are not trying to time markets and trade in and out of them, which is not a strategy we would ever endorse, as it has no historical track record for continued success. 

What makes you the house?

Ultimately, people are still going to buy food, cleaning supplies, cars, houses, new computers, etc. As a result, companies such as Clorox will continue to sell bleach, companies like Home Depot will continue to sell plywood, and companies like Apple will continue to sell phones, just to name a few. As an investor, you represent a stake in all of these companies as part of a diversified portfolio. And while the names of who sells what products will change over time, as long as you have a broadly diversified portfolio, you will have a stake in most all of them. So, while this particular crisis has presented a sudden government induced shock to demand, it is not realistic to presume that the consumer will never buy anything ever again from you. Yes, the “you” being the owner of the various businesses you maintain stakes in as the investor.

This is precisely why markets always recover from these types of sudden shocks, and typically fairly quickly, only to set new highs. Because ultimately, we still need to buy things, even if the government has forced us to delay them for a couple of months.

What if I lose everything?

This is another concern or question we have received many times over the combined 80 plus years of experience that our firm’s members have had. While we are sympathetic to the concerns and fears investors have, this is a fear that is founded 100% in emotion, and not in reality when applying a properly diversified investment portfolio.   

If you were to invest in just a select few companies, then this can in fact happen. Any individual company can in fact go bankrupt. While we can’t say for sure which companies will be bankrupted as a result of this crisis, we are fairly certain some business entities will unfortunately fail.

However, in a diversified portfolio, we have created exposure to virtually the entire global public market with different proportional exposure to each area.  Our portfolios are built primarily with various ETF’s that represent more than 7,000 global companies, and 12,000-15,000 fixed income holdings. So, in order for a portfolio to “lose everything”, you would effectively have to see virtually every company and government on earth go bankrupt.  

If such an implausible scenario were to play out, then it really doesn’t matter what you did with your money. The dollars you have only retain their value because they are backed by the taxing power of the United States government. If every company on earth were to go bankrupt, then there are no longer any businesses or employees receiving salaries left to tax, which would render your dollars worthless.  There wouldn’t be anyone producing anything for you to buy. Nor would there be a bank to hold your money, or an FDIC left to file your claim for your lost funds. 

So, while we don’t subscribe to any such doomsday like scenarios, if you follow such fears through to a rational conclusion, it becomes clear that in such a doomsday scenario, it wouldn’t matter if you had your funds invested or not. It wouldn’t matter if you had $1,000 or $100 million.  Money would become effectively worthless paper. 

So rather than focus on such implausible and unrealistic types of scenarios, we think its more productive to focus on history.  History tells us that these events are little more than a short-term bump in the road. As the link to the article on our website about market corrections demonstrates, these types of declines tend to be short lived, and the use of a proper asset allocation typically doesn’t take that long to return to your previous peak before you begin to see new highs.  
On the Investment Horizon
Upcoming Key Dates on the Economic Calendar 

  • First Friday of each month: Unemployment report for the prior month, released at 8:30AM.

  • Wednesday, April 19 - Federal Open Market Committee (FOMC) releases minutes of previous meeting at 2PM.
  • Friday, April 10 - Good Friday: NYSE closed.
  • Tuesday, April 28 - Wednesday, April 29: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM.
  • Wednesday, April 29 at 8:30AM - GDP, 1st quarter (advance estimate).

  • Wednesday, May 20 - Federal Open Market Committee (FOMC) releases minutes of previous meeting at 2PM.
  • Monday, May 25 - Memorial Day: NYSE closed.
  • Thursday, May 28 at 8:30AM - GDP, 1st quarter (second estimate).

  • Tuesday, June 8 - Wednesday, June 9 - The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM.
  • Thursday, March 26 at 8:30AM - GDP, 1st quarter (third estimate); Corporate Profits, 1st quarter.

  • Wednesday, July 1 - Federal Open Market Committee (FOMC) releases minutes of previous meeting at 2PM.
  • Friday, July 3 - Independence Day observed: NYSE closed.
If you desire an appointment, have any questions on any of this material, or any other financial subjects may relate to your own financial circumstance, please reach out to us at the contact information below:
Brian Cohen, CCO; email: ; phone: 631-923-2487
Chris Congema, CFP®;  email: ; phone: 631-923-2486
Joe Favorito, CFP®; email: ; phone: 631-930-5336

Direct office email:  
Direct phone: 631-923-2485

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 Landmark Wealth Management, LLC
900 Walt Whitman Road, Suite 208
Melville, NY 11747
 (631) 923-2485