4th Quarter Updates and Commentary from IEM
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Dear Friends,
What a wild ride 2020 has been! We hope you and your families enjoyed the holiday season, and are reading to tackle whatever 2021 may bring. IEM is grateful to continue our work with you, and our company as a whole, remains healthy, sound, and thriving in the COVID-era. Due to incredible cooperation between clients and our dedicated team, we’re proud of the work we’ve been able to accomplish on your behalf. From all of us at IEM, we truly appreciate your trust and confidence in us.
Below, you’ll find a variety of topics that may be of interest to you, including Q4 market commentary, tax forms and dates to be aware of, and two employee features on what life has been like in the COVID-era, as well as how family shapes the our decisions while offering sound financial advice to our clients.
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If an investor went into a bear-like hibernation on Jan 1, 2020 and woke up Dec 31, 2020, they would awake to find another great year for capital markets. However, for the homo sapiens that did not have the pleasure of hibernating from the world in 2020, we know that it was a challenging year – in many ways. My thoughts go out to everybody impacted and hurting.
As it relates to the market, 2020 is a great reminder of two things. First, there is significant ‘noise’ with respect to what ultimately drives equity prices. It is important to be able to distill the ‘signals’ while tuning out the ‘noise’. Second, 2020 offered another example of why I believe it is so important to always start from a place of humility in dealing with Mr. Market – a person will be right more often by willing to be wrong more honestly. John Maynard Keynes said, “When my information changes, I alter my conclusions. What do you do, sir?”
The fourth quarter returns of major indices were approximately as follows:
· S&P 500 +12%
· Russell 2000 (Small Cap US Stocks) +31.5%
· MSCI ACWI Ex-US (International Stocks) +16.5%
· Barclays Aggregate Bond +0.5%
My comments looking into 2021 will be brief and covered under two umbrellas.
First, we anticipate there will be a tug-and-pull between high equity valuations versus low fixed income yields in the years ahead. In other words, most (or all) of the equity rise in 2020 has been a result of valuation expansion, in large part because of monetary policy. Investors quickly moved back up the risk ladder in response to inadequate fixed income returns. It’s a theme we talked about quite a bit throughout the past six months. However, there is a logical limit to how much valuation expansion can drive markets forward without underlying earnings accompanying it.
Second, in the last few months, as shown in the returns above, we began to see a rotation from the tech-driven bull market into previously less favored areas, such as international, small cap, and value equities. We continue to philosophically believe that it is important to own well-diversified portfolios that include all areas of the market.
As always, we encourage you to call, email, or use our online portal at any time to touch base with us. We are happy to help you with any questions that may arise. I hope you all have a wonderful 2021.
Best,
Daniel Schoenecker, CFA, MBA
Chief Financial Officer
Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The MSCI ACWX Index is a float-adjusted market capitalization index designed to track the investment results of an index composed of large and mid-capitalization non-U.S. equities. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index . The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities.
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Tax Forms and Dates to Be Aware Of
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The IRS tax form mailing date for most non-retirement 1099 tax forms is February 15. As in past years, National Financial Services LLC (NFS) has applied for and received a mailing extension from the IRS that will permit the generation of some non-retirement 1099 tax documents after February 15, but no later than March 5.
NFS makes every effort to issue your tax form by the February 15 IRS mailing deadline, but not all issuers send final information to NFS in time to meet the standard IRS mailing date. The use of the extension helps ensure that the tax form you receive is accurate and should help minimize the need to send you a corrected form, reducing any potential amendments to your tax return. NFS will post and mail consolidated 1099 tax forms in four waves, outlined in the table below.
The dates below are online posting dates (i.e., the dates that your tax form will be made available online in Investor360°®). If you are enrolled in e-notification, you will receive an email notifying you that your tax forms are ready to view. If you are not enrolled in e-notification, your form will be mailed within five business days of online posting. In either case, once issued, you may access an electronic version of your tax forms in Investor360° under Statements & Documents > Tax Reporting > Most Recent.
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Please note: In instances when tax reporting for an account occurs during the extension period, NFS will provide an online preliminary tax statement starting on February 15. This is viewable only online, in Investor360°, and will provide a single view of current tax information to assist you in determining early tax liability.
In addition, with April 15 on the horizon, we wanted to let you know that, if you’re using TaxAct, TurboTax, or H&R Block software, Investor360°® can save you time and aggravation by accurately transferring the investment account information you’ll need to complete your federal return.
Take a look at these helpful brochures for instructions on how to access, select, and import everything you need into TaxAct, TurboTax, or H&R Block, safely and easily. For more information and additional tax resources, select Help and then Tax Resources from within your Investor360° account:
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ICYMI: IEM’s very own Dan LaNasa, Associate Vice President/Private Wealth Manager, and Noah Merten, Director of Operations and Compliance, wrote two employee features in November and December.
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Dan’s piece is titled Being an IEM Financial Advisor and How Family Helps Shape Client Advice and you can read it here.
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Noah’s piece is titled COVID-19: New Appreciation for Things in My Life and you can read it here.
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Congratulations Muqing!
On a very happy note, IEM’s very own Muqing Yue got married! We’re so happy for Muqing and her husband, Wenhao, on this joyous occasion! We wish them both nothing but the best!
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Best wishes,
Ted Smith, Danica Goshert, Charles Stewart, Dan LaNasa, and the entire IEM team
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Integrated Equity Management
8009 34th Ave South
Suite 1550
Bloomington, MN 55425
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