Recurring Themes

Recurring Themes

For those of you who live in the Twin Cities we hope you are able to get out and enjoy this glorious weather, and for those of you who live elsewhere, we hope you are having a wonderful summer.

Over the past month the B&D advisors have noticed certain themes from their conversations with clients.  These questions are probably top of mind for most of our clients so we thought it might be useful to discuss them in this email. 

Theme 1

Many clients were really surprised when they received their June statements that their accounts had rebounded so much since the lows of March.  They often wonder how this can be with the economy mired in a recession and unemployment still at historic highs?

We believe the incredibly swift and massive amount of liquidity that was provided by the Federal Reserve in late March and April settled the bond and stock markets and provided a floor for prices at that time.  The federal government also acted quickly in providing enhanced unemployment benefits and PPP loans to small businesses (although the efficacy of those loans is questionable).  It is also widely anticipated that the federal government will provide state governments with large amounts of money this summer to help shore up their fiscal balance sheets.  This wave of money has helped prop up stock and bond markets, at least for now.  The Wall Street proverb of “Don’t fight the Fed” has never been truer.  At some point the markets will need to stand on their own at which point the focus will turn to profits and earnings.  We believe that once this juncture is reached, we could see increased market volatility.

Theme 2

How is your family and your health?

Sheltering at home has really hit our retirees hard.  Since the founding of our firm in 1982, there has never been a time where we have focused so much on our clients’ health.  Many of our older clients feel trapped at home and have been fighting loneliness and depression as they are not able to see friends, family and most importantly to many of them, their grandchildren.  In past emails we have provided information on how to survive sheltering at home.  Here are a few of those ideas once again: virtual get-togethers, meditation and exercising, outdoor activities and starting a new hobby – there are even online music and art classes available in case you have always wanted to play the cello, write a novel or paint with watercolors!

Theme 3

What happens on November 4^th?

The election on November 3^rd will impact our country in significant ways.  Depending on the outcome, there will most likely be big winners and losers in the stock market.  For example, If the Democrats were to sweep the Presidency, the Senate and keep the House it would most likely mean a roll back of at least some of the tax cuts that were implemented two years ago.  This could add pressure to stocks, as company profits would be reduced as their tax bills would rise.  The Biden $2 trillion-dollar economic package would focus on green energy infrastructure, which would benefit certain sectors, especially alternative energy stocks.  If Trump were to get reelected, fossil fuel stocks may be able to tread water for a few more years and defense stocks would most likely rally.  The one thing the stock market hates more than anything is uncertainty and the question is would four more years of a Trump presidency create more or less uncertainty in the world?  We find it interesting that the stock market has not sold off as Biden’s lead in many polls has increased, leading us to wonder if the markets would trade higher taxes for fewer Presidential Tweets. 

We hope you and your families continue to be safe and healthy.  We are all in unchartered territory, but we will get through this together – you are not alone.  As always, please feel welcome to call or email us with any questions or concerns or just to talk.  We are here for you.

Take care and be well,

The Bond&Devick Team