Marshall Commentary

We understand that financial planning isn’t always top of mind – but it is for us! Each month we publish a commentary to update you on the latest financial trends and changes.

Wealth IQ – November & December 2020

by Adam Reinert & George Evans II | December 30, 2020 | Commentary

Marshall Wealth IQ is aimed at sharing insightful financial market and economic data in easy to visualize charts with brief analysis. This commentary isn’t designed as a call to investment action, but rather as a dependable source to help you feel better informed about current events in today’s market and the underlying trends impacting current wealth.

Let’s get started:

1)      The U.S. Presidential Election has passed. President-Elect Joe Biden and Vice President-Elect Kamala Harris are the presumptive winners based on the reported Certificates of Vote from the Electoral College. This outwardly contentious election process will officially wrap after Congress meets in joint session on January 6th to count the electoral votes and finally with Inauguration Day on January 20th.

Data Sources: NBC News; The National Archives and Records Administration

2)      Yet to be resolved is which party will control the Senate. Runoff elections will be held on January 5th in Georgia. According to Reuters, more than 1.1 million Georgians have already cast their votes. As the calendar flips to 2021, markets will likely be looking for clarity on the Senate races to better ascertain what policy objectives are most attainable for the incoming Biden Administration.  As you may suspect, polling in the Georgia Senate races is narrow: 

Data Source: FiveThirtyEight 

3)      All else being equal, some provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) will begin to sunset at the end of 2021. If a change in tax policy is a key objective for the incoming Biden Administration, further clarity around some of the more meaningful tax laws set to expire in 2025 for individuals would likely be welcomed:

Source: Tax Foundation 

4)      With the approval of the Pfizer/BioNTech and Moderna COVID vaccines, preventive treatment is no longer just wishful optimism but a real-world certainty. As of December 29th, slightly more than 2.1 million individuals in the United States have received vaccinations. Below is a summary of pre-purchase agreements the United States has in place for COVID-19 vaccines:

 

                                                                                                                Data Sources: Bloomberg

5)      The recent vaccine rollout brings a cascade of light at the end of the ‘return to normalcy’ tunnel and few may be happier than the estimated 31 million small businesses that employ over 60 million Americans. The U.S. Chamber of Commerce Small Business Index has risen over recent quarters as survey respondents view of the national economy continues to improve. Notably, half of respondents continue to express concern about their future and over 70% feel additional government relief funds are needed.

The MetLife & U.S. Chamber of Commerce Small Business Index Score

Data Source: U.S. Chamber of Commerce 

6)      Fortunately, some help may be on the way for those small businesses looking for additional government relief. The Coronavirus Response and Relief Supplemental Appropriations Act, 2021 provides $325 billion to help small businesses, mainly through the Paycheck Protection Program. Below is a summary from the Wall Street Journal for how the relief aid will be dispersed:

Source: The Wall Street Journal

7)      With vaccine rollout and fiscal assistance, it doesn’t seem like a stretch to envision better times ahead for small businesses- especially those in the hard-hit leisure and hospitality industries.  In the year ahead, economists forecast quarterly GDP growth moderating in Q1 before reaccelerating in Q2. A similar growth pattern is expected for consumer spending in 2021. Several notable firms like Pantheon Macroeconomics, Morgan Stanley, and Goldman Sachs are currently forecasting high single-digit GDP growth for Q2 2021.

8)      One of the potential non-vaccine related growth catalysts in 2021 is savings deposits. Savings deposits in the United States have increased by over $1.5 trillion in 2020. To help frame that number, that’s nearly 10% of United States Real Gross Domestic Product. Economists expect this to help fuel a wave in consumer spending as vaccinations rise and COVID restrictions ease/lift.   

9)      2020 was a roller coaster for financial markets and investors. In the first quarter, several market benchmarks hit new highs only to experience sharp contractions a few weeks later as the country, and world grappled with COVID shutdowns and uncertainty. The chart below displays the percent decline market benchmarks experienced from their highs to the market bottom on March 23rd

10)    On March 23rd the Federal Reserve announced several monetary policy measures to help stabilize capital markets. From where financial markets sit today, their actions appear successful. Below are two charts: The first one showing market performance from the bottom (03/23/2020 to 12/28/2020), followed by a second chart displaying year-to-date benchmark performance from 01/01/2020 to 12/28/2020 (capturing both the sell-off and recovery).

11)    For those that were investors during the 2008 Great Recession, some of the 2020 market whiplashes may feel familiar. In 2009, the S&P 500 started the year with a decline of over        -25%. The S&P 500 eventually bottomed in March 2009 and subsequently rallied nearly 65% before finishing the year with a positive return of about 23% (You can see how this compares to 2020 in the charts above, the S&P 500 is the purple line). However, there is a notable difference between the 2008/2009 and 2020 markets- The S&P wouldn’t fully recover from the 2008/2009 decline until 2013; while in 2020 the S&P 500 has already recovered to new highs.  

12)   Lastly, some things simply can’t be measured in charts, like the collective commotion that was 2020. In a year where unwelcomed turbulence starred, it also provided firsthand perspective into the resiliency of financial markets, businesses, individuals, and families. More often than not, we saw humanity’s desire to be it’s very best during the year’s dimmest moments and a collective belief that tomorrow would bring better days. We hope you use the year’s final days to have a Happy Holiday and joyous New Year!

It’s impossible for anyone to know with certainty what will happen today, tomorrow, or even a minute from now. Investment involves risk and volatility; it’s why long-term investors have historically been rewarded with excess returns relative to cash. Our investment department monitors market data and works with our wealth advisory teams to right-size portfolios should something change relative to long-term trends. In the meantime, we’ll continue to share financial and economic data we believe is insightful and relevant to your wealth to help you feel informed.

Thank you for reading; please be well and stay healthy.

Adam Reinert, CFA, CFP® 

Chief Investment Officer

George Evans II, MBA

Chief Investment Officer

Disclosure: Marshall Financial Group, Inc (“Marshall Financial”) is an SEC-registered investment adviser with its principal place of business in Doylestown, Pennsylvania.   This newsletter is limited to the dissemination of general information pertaining to Marshall Financial Group’s investment advisory services.  Investing involves risk, including risk of loss.

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