First and foremost, all of us at Financial Plans & Strategies hope you and your family are healthy and have not had any direct experience with the coronavirus so far. The most important thing we can do is work together as a community to slow the spread of the virus.
We at FP&S are doing our part by working from home – fortunately we have the technological capabilities to do so, but we are having to adapt to these changes. If you call our office, you might notice that the phone rings three times instead of twice, but we are continuing to provide our clients with the same services, just from a safe distance. We have employees checking in on each office to see if clients have dropped off documents, but we strongly prefer all communication and information sharing to be done through phone, email or the FPSLive Vault. We will continue to follow official guidelines and we will be excited to announce when we are all back in the office as soon as safety allows.
Many businesses and their employees are already suffering from the global health crisis caused by the COVID-19 pandemic. There is talk of a recession, but if a recession does hit, the length and breadth is not certain. Just as in 2008, we are here to help guide and support you, through what can be a difficult and frightening time. We at FP&S, and the fund managers we work with, believe that there is a recovery awaiting us at the other side of this abyss.
Even from this side, there is always room for hope and optimism, and there are practical actions we can all take now. Perhaps we can all use this time to take care of things we’ve been putting off and develop healthy and positive habits:
- Go through your files. Do you have documents with sensitive information that you no longer need?1 Set them aside to bring to the Northside Office’s Shredding Event on May 8th. If you can’t make that date (or if we have to postpone it), the Greenwood Office is hosting a Shredding Event in October. More details to follow on both events, but we will be accepting donations for charities at each event.
- Learn how technology can help. As we all practice social distancing, many have cautioned that loneliness might be the next epidemic.2 In addition to regular phone calls and texts with friends and family, video chat apps, neighborhood social apps, and group chats may help fill the void. We also recommend that you explore the FPSLive client account website to become more familiar with it – we have been utilizing this software for client appointments more as we meet with clients remotely.
- Review your spending and revise (or make) your budget. If you can, see if there are any areas you can reduce spending for a while. However, remember that if we do have hard times ahead, they are temporary: keep in mind your goals and dreams because they are still attainable. If you would like to reduce or stop your monthly distributions, please contact our office. You also may consider deferring lump-sum distributions and Required Minimum Distributions (you have until December 31st to take your RMD).
- Take another look at your home loans. Depending on your current home mortgage rate and term length, now might be a good time to refinance your mortgage. Home equity loan rates are also appealing right now. Keep in mind that the best use for home equity loans is for home improvements that will increase the value of your home. Let us know if you are interested in refinancing or obtaining a home equity loan, and we can provide a referral.
We believe the article below, from Vanguard, does a good job of explaining what we’re dealing with.
Financial Plans & Strategies is here to help you through these tough times. We wish you well and hope to see you soon. In the meantime, call us at 317-882-7675 if you have any questions.
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Perspective in a challenging time
March 16, 2020
At a time such as this, with double or even triple doses of concerning news daily, a little perspective can go a long way.
As troubling as the rapid descent of stocks into a bear market has been, and as much as it can preoccupy investors, we all need to think first about our health and the health of our loved ones. Covid-19, the disease caused by the coronavirus that emerged in China late last year, has been declared a pandemic. The speed at which the disease is spreading has led authorities to take strong measures, including school closures and cancellations of sporting events, on national and community levels.
The disruption to daily lives could be substantial all around the globe. Many in Asia have lived with such disruption, and heightened virus concerns, for several weeks already. It hasn’t been and it won’t be easy, but it’s necessary.
A new, short-term reality
Financial markets clearly are reflecting our new reality, recognizing that the strong medicine required to thwart Covid-19’s spread is also likely to blunt short-term economic growth. The result may be a mild U.S. recession, although if it ensues we believe it could be short. We also believe that recession risk is heightened in other developed markets.
In China, where activity is slowly getting back to normal, we expect GDP growth of around 5% in 2020, compared with a reported 6.1% for 2019, with risks to the downside as the coronavirus outbreak plays out among China’s global trading partners.
This is where a few points of perspective specific to economics and markets may be valuable:
- We expect markets to reach this point from time to time. Global equity markets have experienced eight bear markets over the last 40 years, or one roughly every five years.1 Put simply, a significant market pullback was inevitable.
- We remain optimistic about the prospects for economic and market recovery. The last global recession, the global financial crisis of 2008 and 2009, was deep and long. We don’t view our latest challenge in the same light. The global financial crisis was a house of cards falling down, a crisis of excessive leverage, with the financial system itself in jeopardy. The system is sounder now. And although we do expect that global economies will contract in the second quarter, we believe that most will be in a position to rebound strongly later this year and early next year when the virus-related shock subsides and pent-up demand emerges.
- Global policymakers’ response will be key. Swift, decisive action is required to mitigate the virus itself and its economic effects. Because interest rates are hovering near and even below zero, policymakers can give themselves a truly low-interest loan. We believe that bold, appropriately targeted fiscal stimulus can help individuals and economies get beyond what should be a temporary setback. We believe such measures should be front-loaded, and should target immediate virus containment and eradication efforts, as well as support small and medium-size businesses and households that may need cash temporarily to stay afloat. Markets have responded to stimulus proposals lately to the extent that they believe the proposals can be effective.
I wrote several days ago about how navigating the uncertainty of the coronavirus outbreak was a matter of balancing what we know with what we don’t know. Some of what we learn in the weeks ahead may set the markets back temporarily. Making impulsive investment portfolio moves in a time of turbulence is never a wise move. We believe that, in the end, securities markets and broader economies will be resilient.
1 Source: Vanguard analysis based on the MSCI World Index from January 1, 1980, through December 31, 1987, and the MSCI AC World Index thereafter, indexed to 100 as of December 31, 1979. Both indexes are denominated in U.S. dollars.
Joe Davis
Joseph Davis, Ph.D., is Vanguard’s global chief economist and the global head of Vanguard Investment Strategy Group, whose research and client-facing team develops asset allocation strategies and conducts research on capital markets and global economies. Joe also chairs the Strategic Asset Allocation Committee for multi-asset-class investment solutions. As Vanguard’s global chief economist, Joe is a member of the senior portfolio management team for Vanguard Fixed Income Group. He is a frequent keynote speaker and has published white papers in leading academic and practitioner journals. Joe helped develop the Vanguard Capital Markets Model® as well as the firm's annual economic and capital markets outlook. He earned his B.A. summa cum laude from Saint Joseph’s University and his M.A. and Ph.D. in economics at Duke University.
Sources:
https://www.consumerreports.org/taxes/how-long-to-keep-tax-documents/