Q3-2020 Wealth Management Update

By The Trust Company on October 26, 2020

THIRD QUARTER 2020 MARKET REVIEW

Michael Carlisle
Michael Carlisle, Vice President &
Investment Committee Chair

The 3rd Quarter of 2020 produced another quarter of strong market gains, with the NASDAQ, S&P 500 and Dow climbing 11%, 8.5% and 7.6% for the quarter, respectively, despite each benchmark index dropping throughout September.  

In spite of the Covid-19 lockdowns, these equity indexes were near, and the NASDAQ well-ahead of, their 2019 year-end closing levels.  As we’ve previously commented, reopening the economy, fiscal stimulus, low interest rates, and aggressive Fed policy have combined to put something of a floor under U.S. equity prices.  The market’s sensitivity to these factors can be clearly seen as the September stock market decline coincided with stalled stimulus talks in Congress.    

The economy continues to show improvement in employment, labor participation, and hours worked, but all remain well below pre-pandemic levels.  The Federal Reserve Open Market Committee (FOMC) is maintaining the Federal Funds rate under 0.25%;  this policy will likely

continue until we reach optimal employment and inflation has risen to at least 2%.  In response, housing sales are showing strong gains and consumer prices have increased 1.3% for the 12 months through August.  Industrial production has risen the past four months, but it still remains below pre-pandemic levels.  

Globally, Europe saw an increase in Covid-19 cases and that triggered a negative downturn for foreign stocks during the quarter.  Slow economic activity has increased calls for the Bank of Japan to initiate new stimulus measures.  

The economy is expected to continue its slow grind upward during the 4th Quarter.  The pending U.S. election will contribute to market volatility until the results are known and confirmed. History suggests that US equity markets will be volatile, but move in a sideways trading range, with a down-trend bias, until the end of Q1 2021, particularly given the strong recovery in equity markets since March 2020.

 

MEDICARE OPEN ENROLLMENT

The Medicare open enrollment period runs from October 15 to December 7 each year. During this time, Medicare beneficiaries can re-evaluate and make changes to their coverage, and in some cases, enroll in a prescription plan for the first time. All changes become effective January 1.  It can be a daunting task, with rules that may be confusing and may seem arbitrary. Current clients of The Trust Company are encouraged to take advantage of our Medicare Planning services, offered at no additional fee.

What happens during Open Enrollment?

  • Anyone with Original Medicare {Parts A or B) can switch to a Medicare Advantage Plan (Part C), and vice versa.
  • Anyone who has Original Medicare also can join, drop or change a Part D prescription drug plan.
  • Anyone with Medicare Advantage can switch between Advantage plans that may offer different drug coverage.  

Also, individuals who missed or declined enrollment in a prescription drug plan during their Initial Enrollment Period (IEP) or Special Enrollment Period (SEP) can sign up for prescription coverage during the fall Open Enrollment Period. It’s very important to note that for those on Original Medicare, fall Open Enrollment is the only time Medicare beneficiaries can make changes to Part D coverage.

There is a General Enrollment Period from January 1 through March 31, but it is intended primarily for Medicare Advantage participants. However, it is possible to switch from Medicare Advantage to Original Medicare and select a Part D plan during this time.

It is not possible to obtain Part D drug coverage outside of these enrollment periods, and failure to sign up during these time frames could result in late penalties. These penalties are added to the participant’s drug premiums for all subsequent years of coverage. That’s definitely an outcome we’d all like to avoid!

The Financial Planning Team at The Trust Company is here to help. Contact your advisor or FinancialPlanning@TheTrustCo.com if you have questions about the Open Enrollment process.

 

PORTFOLIO MANAGEMENT DURING ELECTION YEARS: DOES IT MATTER?

Mark Knackendoffel
By Mark Knackendoffel, CEO

We have heard from a fair number of Clients concerned about market volatility due to the upcoming elections.  Much of this concern stems from the uncertainty surrounding the candidates, platforms and potential impacts on the economy and investment markets, particularly regarding the U.S. Presidential and Congressional Elections.   Of course, we must also factor in whether such volatility would be driven toward the downside . . . or the upside . . . or both.

Vanguard recently analyzed the correlation of market performance and election cycles.   Their conclusions were summed-up in the title of that research publication:   “Elections Matter – But Not So Much To Your Investments!”  The data measured both Election Year Returns and Market Volatility during two time periods:

  1. Performance: 1860-2019 (40 Presidential Election Years and 120 Non-Election Years)
  2. Volatility: 1964-2019

Election Year Performance – No Statistically-Significant Difference
Of course, elections have great importance in upholding our U.S. tradition of democratic, representative government. However, their correlation with market performance over the past 160 years has historically proven to be negligible.

Volatility and the Vote - Markets tend to ignore elections  
Given the uncertainty of political campaigns and election-year cycles, you may think that in the months closest to an election, there is an increase in volatility. Think again. In actuality, the opposite has been true. From 1964-2019, a measurement of the S&P 500 Index’s annualized volatility in the 100 days both before and after a U.S. Presidential election was the same, and was also lower than annualized volatility for the full time period:

Elections generate lots of headlines, but that should not sway you from following your financial plan. It’s understandable to have concerns about this upcoming election or any elections. But as far as your portfolio and the markets are concerned, history suggests it will likely be a nonissue over the long-term.

Part of successful investing is understanding what you can control, such as saving, spending and asset allocation, and letting your emotions take a backseat to your financial plan. By maintaining perspective, discipline, and a long-term outlook, you can sustain progress toward your financial goals, despite the short-run uncertainty that events, such as elections, can create.
 

Source:   The Vanguard Group – 10/1/2020

WELCOME, KATY PRICE!

Katy Price, CTFA
Please help us welcome Katy Price, who  joined our Lawrence team as Vice President & Trust Officer after serving as a Trust Officer for more than 11 years at two major banks.  She works with clients to establish and execute wealth management plans. She holds the Certified Trust & Financial Advisor (CTFA) designation and is an Honor Graduate of the Cannon Financial Institute’s Trust I – III courses held at prestigious U.S. universities.

Katy’s two passions are animal rescue and early intervention in children’s mental health. She has served on the board of CASA of Shawnee County for six years with two terms as Board President, as well as the Board of Directors for the Family Service & Guidance Center.

In her free time, Katy enjoys being outdoors, whether doing yard work, taking a brisk walk, or riding horses back home in Austin, TX. A perfect day includes hanging out at home with her daughter and five—yes, five—sweet rescue dogs.

 

WELCOME, TENNILLE LESTER!

Tennille Lester
Tennille Lester has joined our Columbia, MO branch office as Associate Trust Officer.

She brings more than 13 years of personal banking, branch management and regional management experience. Most recently she managed sales and operations for five bank branches in Columbia, MO. She holds a bachelor’s degree in finance from the University of Missouri.

Tennille’s community service activities include service on the board of directors for the Columbia Chamber of Commerce, three years on the chamber’s finance committee, the Women’s Network steering committee (2018-2019 Chair), and prior board service for the Ronald McDonald House. Tennille has been honored this year as one of three finalist nominees for the Athena International Young Professional award.

Originally from Bowling Green, MO, Tennille resides in Columbia with her husband and daughter.