This Week from Jesse Hurst

Jesse W. Hurst, II
CFP® CERTIFIED FINANCIAL PLANNER™
AIF® ACCREDITED INVESTMENT FIDUCIARY
Another 2020 Milestone!!

2020 has been packed with negative news and milestones that most people wish they had never seen or lived through. From viral pandemics to social unrest and bitterly partisan elections, it has truly been a year that even Marty McFly would never want to get into his DeLorean and come back to visit! However, today I want to put a positive milestone achieved this year into some perspective. 

I started my career in the financial services industry in August of 1987. Earlier that year, on January 8th (which also happens to be Elvis’s birthday, thank you very much), the Dow Jones Industrial Average (DJIA) crossed 2000 for the first time. I remember everyone watching the news in horror and disbelief as the stock market fell more than 500 points on Black Monday, October 19, 1987. This was a drop of 22.6% the biggest single day stock market loss ever.

It took four years and three months, until April 1991, that the DJIA hit its next major milestone, crossing 3000. It would take just under eight additional years, to March 1999, for the Dow to reach the 10,000 level. It was truly a happy and historic time. Technology stocks were booming, and even though Fed Chairmen Alan Greenspan told us that there was “irrational exuberance” creeping into the markets, everybody was partying like it was 1999.

The market continued to climb until the following March when the dot.com bubble began to burst. This was followed by the tragic events of 9/11, and subsequently the corporate fraud and accounting issues surrounding Enron and WorldCom. The stock market fell over 47% during this time period, and we did not reclaim the 10,000 market again until 2009. We finally made it to Dow 20,000 on January 25, 2017, nearly 17 years for the market to double from its initial encounter with the 10,000 level.

Fast forward to November 2020, and less than four years later, here we are at Dow 30,000. From a mathematics standpoint, it is important to remember that the last 10,000 points of our trip have represented a 50% increase in the index, while the previous 10,000 point journey represented a 100% increase or doubling of the Dow.

Early in my career I can remember people projecting that someday the Dow would be at 10,000, 20,000 or even 40,000. It seemed implausible at the time, but it is simply compounding and math. I truly believe that a free market economy, entrepreneurialism and innovation will continue to take us to new heights. However, the journey that I have lived since my start in 1987, from Dow 2000 to 30,000 has been filled with peaks, valleys, bumps and air pockets (as the chart below shows ). The future will likely be the same.
 
It is important to remember that the market has rewarded people who have stayed invested for long periods of time. We need to look no further than Warren Buffett who has said that his favorite holding period for stocks is forever. Mr. Buffett is one of the most revered but least emulated investor in history. Let’s do our best to follow his example as we continue “Moving Life Forward”.

Investors cannot directly invest in indices. Past performance does not guarantee future results.

Weekly Market Commentary
December 7, 2020
 

The Markets
 
When is bad news good news? Take a look at last week.

Major stock indices in the United States hit all-time highs on Friday, despite a lackluster employment report and a surge in COVID-19 cases, reported Lewis Krauskopf of Reuters. During the week, we saw:

The slowest jobs growth since the economic recovery began. The Bureau of Labor Statistics reported 245,000 jobs were created in November. “…a key sign of holiday enthusiasm – the hiring of thousands of workers to help with the holiday retail rush – simply didn’t happen this year. Some of those workers – but clearly not enough – are helping with online shopping duties, filling warehouses around the country, or driving vans from house to house,” reported Avi Salzman of Barron’s.

New unemployment claims remain steady. More than one million people a week are filing first time jobless claims, reported Dion Rabouin of Axios. On November 14, more than 20 million Americans were receiving unemployment assistance.

It’s difficult to know how much weight to give this data since the Government Accountability Office shared weekly unemployment insurance estimates issued by the Department of Labor “… have potentially both overestimated and underestimated the total number of individuals actually claiming unemployment insurance…due to state backlogs in processing claims and other data issues…”


COVID-19 cases spiked across the United States. Coronavirus-related deaths hit a one-day record last week, and “…hospitalizations surpassed 100,000 for the first time this week, leaving hospitals in some regions of the country without enough beds in intensive-care units to meet their patients’ needs,” reported Melanie Evans of The Wall Street Journal. This is undermining consumer confidence and depressing economic activity.

In light of this news, why were markets bullish?

Signs the economic recovery is faltering create a strong incentive for Congress to pass a stimulus bill in 2020 instead of delaying until next year, reported Barron’s. An analyst cited by the publication said, “Under the circumstances, it is hard to be a seller of any risk asset as long as there is a good possibility of getting a deal done…”

During the next few months, markets may be quite volatile. Hang tight and keep your eyes on your long-term financial goals.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
WHAT DOES IT TAKE TO BE MIDDLE CLASS IN THE UNITED STATES? The not-so-simple answer is it depends on how you define ‘middle class.’

In a 2018 report, Pew Research Center defined middle class as middle income. “In our analysis, “middle-income” Americans are adults whose annual household income is two-thirds to double the national median, after incomes have been adjusted for household size. In 2016, the national middle-income range was about $45,200 to $135,600 annually for a household of three.”

In November, USA Today shared an analysis by Michael Sauter that adopted a different standard. It considered U.S. family income from “…the lower boundary of the second quintile and the upper boundary of the fourth quintile [of the U.S. Census Bureau’s 2018 American Community Survey], representing in total 60 percent of American families…The analysis made some cost-of-living adjustments and found, “…the range of income that could be considered middle class in a given state.”

In the states with the highest median (the number in the middle of the list) family incomes, middle-class income ranged from:

  • Massachusetts: $35,233 to $188,259
  • New Jersey: $39,920 to $197,868

States in the middle of the pack for median family income had these middle-class income ranges:

  • Wyoming: $25,760 to $111,422
  • Kansas: $24,741 to $105,573
  • Iowa: $24,663 to $101,008

In the states with the lowest median family incomes, the middle-class income range was:

  • West Virginia: $17,452 to $85,516
  • Mississippi: $15,165 to $81,480

It’s interesting to note the 2020 federal poverty threshold set by the U.S. Department of Health and Human Services, which determines eligibility for various federal programs, was $26,200 for a family of four.

Not everyone uses income to define the middle class. Richard V. Reeves, Katherine Guyot, and Eleanor Krause of Brookings explored the question, asking:

“Is middle-class status a reflection of economic resources, especially income or wealth? Or is it denoted more clearly by occupational status and/or educational attainment? Is it, rather, a state of mind, a set of aspirations, or revealed through behavior, cultural tastes, or by certain kinds of consumption? Is it a question of how we define ourselves?”

What do you think?


Weekly Focus - Think About It

“I wasn't going to be an actor. I was going to be a lawyer. I came from a family just above working class, just below middle class, a great family of wonderful values. The idea of me having a chance for a law degree was enticing. Enticing to me but also very enticing to my family.
--Gerard Butler, Actor

Best regards, 
 
Jesse Hurst CFP ®, AIF®
Investment Advisor Representative
 
Impel Wealth Management 
P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
  
Securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker/dealer and a Registered Investment Adviser. Cetera is under separate ownership from any other named entity.
* These views are those of Carson Coaching, and not the presenting Representative, the Representative's Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client's portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* 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.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as "The Dow," is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

* Consult your financial professional before making any investment decision.
*To unsubscribe from the Impel Wealth Management please reply to this e-mail with "Unsubscribe" in the subject line, or write us at 2006 4th Street, Cuyahoga Falls, OH 44221.
  
 
Sources: 
https://www.reuters.com/article/usa-stocks/futures-near-record-highs-as-stimulus-hopes-build-idUSKBN28E1IV https://www.bls.gov/news.release/empsit.nr0.htm https://www.barrons.com/articles/stocks-hit-new-highs-as-reopening-euphoria-rages-on-can-it-last-51607130695?mod=hp_DAY_Theme_1_1 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/12-07-20_Barrons-Stocks_Hit_New_Highs_as_Reopening_Euphoria_Rages_On-Can_It_Last-Footnote_3.pdf) https://www.axios.com/pandemic-unemployment-assistance-expiring-8461b73d-1f9c-4cf2-ba6c-ed93e9ede5f0.html https://www.gao.gov/about/press-center/press-releases/need_for_transparency_2020.htm https://www.conference-board.org/data/consumerconfidence.cfm https://www.wsj.com/articles/as-covid-19-patients-stretch-hospitals-some-doctors-ration-intensive-care-11607022592 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/12-07-20_WSJ-Covid-19_Hospitalizations_Single-Day_Deaths_Hit_New_US_Highs-Footnote_7.pdf) https://www.pewresearch.org/fact-tank/2018/09/06/the-american-middle-class-is-stable-in-size-but-losing-ground-financially-to-upper-income-families/ https://www.usatoday.com/story/money/2020/11/21/income-it-takes-to-be-considered-middle-class-in-every-state/43067013/ https://aspe.hhs.gov/poverty-guidelines https://www.brookings.edu/research/defining-the-middle-class-cash-credentials-or-culture/ https://www.brainyquote.com/quotes/gerard_butler_636853?src=t_middle_class


Securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker/dealer and a Registered Investment Adviser. Cetera is under separate ownership from any other named entity. Confidential: This email and any files transmitted with it are confidential and are intended solely for the use of the individual or entity to whom this email is addressed. If you are not one of the named recipient(s) or otherwise have reason to believe that you have received this message in error, please notify the sender and delete this message immediately from your computer. Any other use, retention, dissemination, forward, printing, or copying of this message is strictly prohibited. 
Impel Wealth Management 
2006 4th Street, Cuyahoga Falls, OH 44221   
P: 330.800.0182   TF: 844.422.5550   F: 234.312.0460