Our President, Joseph Eschleman, recently penned a white paper for Towerpoint Wealth that discussed 14 different strategies to consider during the coronavirus crisis. Joseph was cited as an expert by MutualFunds.com for his work and content on the subject, who published his commentary on their website on June 11.
By: Nathan Billigmeier, Director of Research and Analytics
From ancient civilizations to modern society, humans have always had a fascination with gold. The yellow metal has been used as currency, as jewelry, and incorporated within various other industrial applications. Gold also helped shape United States history when it was discovered in the Sacramento Valley in 1848 sparking the California Gold Rush. But does it belong in your investment portfolio? We will discuss some of the benefits and drawbacks below.
1) Store of Value
Famed financier J.P. Morgan once stated, “Gold is money, everything else is just credit.” This quote strikes at the core of the “gold as a store of value” argument. But what exactly is a store of value and what qualifies gold to be viewed as such?
By definition, a store of value is an asset that maintains its value without depreciating. Gold’s ability to maintain wealth by preserving purchasing power has been well documented. Civilizations throughout history have turned to gold as a means of exchange as well as a hedge against currency devaluation.
Gold’s finite supply also helps boost its appeal as a store of value. To date, all the gold mined throughout history would fit into two and a half Olympic-sized swimming pools. According to the US Geological Survey (USGS), approximately 187,000 metric tons of gold has been mined in total, with 57,000 metric tons remaining underground.
Critics of gold state that it is an antiquated means of exchange with little utility or industrial application, outside of jewelry, and should therefore not be considered a store of value. Specific to utility, their argument could be viewed as valid. But what gold lacks in utility, it makes up for in investor psychology. Humans have long placed value in gold. While this value may very well be due to its historical reputation, until this connection is broken, gold will remain one of the primary assets used to preserve wealth
2) Low Correlation to Other Investments
One key aspect of a properly diversified portfolio is owning investments that have a low correlation to each other. What does this mean, and why is it important? Correlation is a numeric value from -1 to +1. The closer that two different investments are to having a +1 correlation, the higher the likelihood their respective market values will move in tandem with each another. Vice versa is true for investments with a -1 correlation. Investments with a correlation of 0 are completely unrelated, meaning the price movement of one has no relation to the price movement of the other.For longer-term investors, it is important to have the correlation between the various asset classes (read: stocks, bonds, alternatives, cash, etc.) held in their portfolio be as close to zero as possible. This allows investors to better manage the risk of their portfolio and increases the likelihood that the share price of investments held in different asset classes will not move in the same direction in response to current economic and market trends.
Gold is a unique asset in that it has a low, or sometimes even negative correlation to the other primary asset classes typically included in a properly diversified portfolio. In fact, as you can see from the above graph, it tends to have a negative correlation to US equities, hence sometimes being described as a “flight to quality” asset.
Just as you purchase home or auto insurance to protect your assets against unforeseen events, you should consider doing the same with your investment portfolio. As recent events have shown us, market and economic crises can and do happen.
Given its negative correlation to US equities, gold can provide needed insulation to your portfolio, helping it to better absorb these inevitable pullbacks. While it will not completely offset equity losses, gold can help reduce volatility and provide “downside insulation” to a portfolio.
As the chart below shows, with the exception of two instances, the 1997 Asian financial crisis and 2013’s “Taper Tantrum,” gold has achieved positive returns during times of equity unrest. It also has a tendency to outperform US Treasuries during these downturns, which many view as another safe haven asset.
4) But What About Income?
Gold is not without its faults. One of the main arguments against gold ownership is the lack of a dividend or interest payment and the fact it has little to no industrial production value.
One of the most famous investors in the world, Warren Buffet, is an outspoken critic of gold ownership for these very reasons. He has been quoted as saying,
“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
…and Mr. Buffett would be correct. Gold has little to no real economic utility, does not generate sustainable cash flow, and does not pay a dividend.
What it does offer is relative stability and the potential for price appreciation. During turbulent economic times when company cash flows decline and dividends are cut or reduced, gold tends to shine, as investors try to preserve capital and fear the inevitable stimulus measures taken by central banks and/or government could stoke inflation and decrease the purchasing power of their currency.
More recently, financial markets have also been grappling with historically low interest rates, with some countries even experimenting with negative interest rates (i.e. investors paying the government interest, instead of receiving it, when owning government-issued bonds). This has significantly lowered the opportunity cost of owning gold (which pays no interest) versus owning government-issued bonds (which pay interest) as investors look for safety during times of market unease. Gold has been a direct beneficiary as the declining interest rate trend has gained steam, particularly in countries issuing bonds with negative interest rates. Why would an investor choose to pay interest to own a government bond when they could own gold instead, achieving the similar end goal of capital preservation?
4) What happened to gold with the COVID-19
COVID-19 market pullback in March of 2020, gold suffered sizable declines along with equities. In fact, it suffered its largest weekly decline since 1983 while equities dipped into bear market territory in a record-shattering 20 days. Doesn’t this fly in the face of all the previous arguments for owning gold?
It depends on what you believe. Some have argued that the declines in the price of gold, at the exact same time equities were dropping precipitously, debunks the theory that gold should be viewed as a safe haven asset during times of market turmoil. Especially coupled with the fact that US Treasury bonds and the US dollar remained strong throughout the collapse in equity prices.
Proponents of gold have argued that the price decline the metal suffered in March, 2020 was due to the rapid shock the US economy experienced as virtually all of us entered lockdown. This forced many investors to raise cash as rapidly as possible, and gold, being a very liquid asset, provided easy access to needed cash. These proponents would challenge that the price of gold acted similarly during the 2008/2009 financial crisis before ultimately touching all-time highs, not too different to what has happened over the last three months.
By analyzing the above chart, we are able to see that initially gold did maintain its strength as equities began to move lower. As the equity losses accelerated, gold prices declined before beginning a steady march higher prior to the March 23 low in equity prices. This does lend credence to the claim by gold “bulls” that the metal was used as a source of cash by investors during the selloff, and in doing so, helped them limit their losses.
While critics may remain unconvinced, it is hard to deny that gold has maintained its luster throughout history as a go-to asset during times of uncertainty. Its ability to provide ballast to a portfolio allows your longer-term financial goals to remain upright and on course. We are by no means advocating that investors transition 100% of their assets into gold. However, we feel that a modest allocation of 3-7% in gold does have a place in a properly diversified investment portfolio.
How Can We Help?
At Towerpoint Wealth, we are a legal fiduciary to you, and embrace the professional obligation we have to work in your best interests 100% of the time. If you would like to discuss your circumstances further, we encourage you to call (916-405-9170) or email (firstname.lastname@example.org) to open an objective dialogue.
Towerpoint Wealth, LLC is a Registered Investment Adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Towerpoint Wealth, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Towerpoint Wealth, LLC unless a client service agreement is in place
The COVID-19 crisis has challenged and changed us all in different ways, including what we think of as essential. The conversation over what qualifies as an “essential” versus “non-essential” business has impacted many companies that produce and sell items and services considered essential for everyday use. What do you think of as essential (?) – we encourage you to reply to this email and let us know.
Traditionally defined, consumer staple stocks are broken down into five main industries: beverages, food, household goods, personal and hygiene products, and tobacco – services and items that individuals are either unwilling or unable to eliminate from their budgets even in times of financial trouble. Recently, a more contemporary definition of a consumer staple has emerged from our pandemic-altered lifestyles, and consequently, the definition of a consumer staple stock has arguably changed. Introducing, the FAANG stocks:
Facebook (social media). Amazon (e-commerce). Apple (smartphones and tech hardware). Netflix (video streaming). Google (online search and services). All five companies are known for their dominance in their respective industries and sizable customer bases. Combined, they have a market capitalization of more than $4 trillion! Additionally, as a group (below, in purple), the stocks have collectively outperformed the overall stock market (as measured by the S&P 500, below, in yellow) by a healthy margin so far in 2020:
While many other companies have experienced major interruptions to business operations during the COVID-19 pandemic, revenue and earnings for the FAANG stocks have been excellent. Facebook doubled its first quarter profit from 2019; Amazon’s first quarter revenue in 2020 increased 26.4% from the same period a year ago; Apple increased its dividend by another 6% on April 30; Netflix now has 182.9 million subscribers, more than doubling its own projections for new paying customers in Q1 of 2020; and Google’s parent company, Alphabet, experienced year-over-year revenue growth of 13% (to $41.2 billion) in the first quarter of 2020. Clearly impressive numbers for these “essential” businesses.
Will companies like the FAANG stocks continue to dominate in the hazy and nebulous “new normal” we are all continuing to get used to, or will things revert and this outperformance be temporary? One thing is for certain – we should get used to life, as well as the financial markets, remaining unsettled and uncertain for the foreseeable future.
- Did you know that COVID-19 is an acronym for coronavirus disease of 2019? The name was selected by the WHO, the World Organization for Animal Health, and the Food and Agriculture Organization of the United Nations, working in cooperation. Their joint guidelines required that the name and its abbreviation be easy to pronounce, related to the disease, and not refer to a specific geographic location, a specific animal, or a specific group of people.
- Good news heading into the weekend: While one additional coronavirus diagnosis is too many, the curve is flattening, as new COVID-19 cases in the United States have been stable for over two weeks now, according to Deutsche Bank, the World Health Organization, the CDC, and Worldometer:
- More than 90 Sacramento restaurants are re-opening for dine-in service this weekend. To see the full list within the Sacramento Bee article, create a free account with the SacBee, or click HERE, and then cut and paste the URL into a web browser opened in “incognito mode” (a nifty little trick):
In addition to our dependence on the aforementioned technology behemoths and our desire to dine out again, a number of trending and notable events occurred over the past few weeks:
- Two dams failed after heavy rains in Michigan, leading to large evacuations
- Major League Baseball issues detailed safety proposal in an ambitious return-to-play plan for 2020
- Fred Willard, comic actor best known for his scene-stealing roles in “Best of Show” and “Anchorman,” and on sitcoms “Laverne and Shirley” and “Everybody Loves Raymond,” dead at age 86
- Jerry Stiller, actor and comedian known for his role as Frank Costanza in “Seinfeld” and Arthur Spooner in “The King of Queens,” dead at age 92
- Monday is Memorial Day. The Chief of Staff of the U.S. Army posted a YouTube video with a message reminding us to remember our fallen soldiers
We are seeing early signs that these times of separation are beginning to pass, and opportunities to be back together in person with those we have been missing, are beginning to grow. And as always, whether in person or via a Zoom teleconference, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, email@example.com) with any questions, concerns, or needs you may have – the world continues to be an extremely complicated place, and we are here for you.
As we trend towards gaining back the freedoms we surrendered in the name of saving lives and flattening the curve, the slow unwind of sheltering-in-place is beginning:
We are continuing to witness the COVID-19 pandemic re-order virtually every industry in the world, and concurrently, many aspects of our formerly “normal” lifestyles. And as we have adapted to today’s slower lifestyle and “new normal,” we have been reminded of just how important our homes have become – as a safe haven, a de facto schoolhouse, an impromptu remote office, and a warm family nest. However, as much as we have learned (a bit forcibly) to love being at home, and as integral as home has been in this new normal, most of us would agree that being at home this much has gotten a little long-in-the-tooth.
There are many more chapters yet to be written about the COVID-19 crisis, and as much as we love our “warm family nests,” this next chapter in the story is one that we all have been anxiously awaiting – the safe and sturdy return to shared communal life, outside of our homes.
As the dawn of the decline of the shutdown approaches, we are all eager to regain the ability to step outside our homes and see friends and family again, to shop at our favorite stores, to eat at our favorite restaurants, and yes, to trade in our trusty sweat pants for our favorite work attire as we begin to head back to work. But make no mistake about it, what our lives will look like as summer approaches will be markedly different that the way we lived our life in February. A “new normal” is upon us, and being adaptable, and socially, economically, and physically aware, is paramount.
A summary of our views:
- We are all working more hours now than before the COVID-19 outbreak – expect it to continue
- Companies will begin bringing employees back to work over the next two to six weeks, with strategies for doing so being differentiated and customized based on geography and industry
- People are starving for connection, and content, and while we yearn for and need physical connection with each other, the transformation of digital communications and social media has been monumental
- We are optimistic that, as a country, we can and will find the right balance between a compassionate and pragmatic democracy
- Debt, both personal and governmental, will finally become a central economic and political theme
- Public confidence levels are quite low, but the condition will be temporary as we continue to learn about the virus and make irregular progress in defeating it
- Serious concerns surrounding public transportation will lead to a longer timeline for people getting back to work in larger cities
- We are not planning to see even the possibility for a COVID-19 vaccineuntil mid-2021, at the absolute earliest
- If there is a significant resurgence in COVID-19 cases this fall, the fatigue of the situation will be extremely painful and we could retest market lows
- The crisis has been devastating to lower income families, and could cause further longer-term disparity and danger to their well-being
- Expect taxes to increase, regardless of who wins the 2020 presidential election, as our massive stimulus programs need to be paid for
- Crises accelerate trends, and there will be larger moves in businesstowards technology, consolidation, and outsourcing, with less need for real estate
- A New Deal-like infrastructure program will be a central component in additional Federal stimulus borrowing and spending
On a much lighter note, and for anyone who is a fan of Billy Joel (who isn’t?), click HERE (or below) to spend four minutes listening to/watching a VERY entertaining “social distance-sing project” where the Phoenix Chamber Choir performs The Longest Time – the adapted lyrics and instruments are great!
Tragically, some have lost loved ones during this time, and we acknowledge that will change life for them even on the upside of this pandemic. But for most of us, these times of separation will pass and we will be back together, in person, with those we have been missing. And as always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, firstname.lastname@example.org) with any questions, concerns, or needs you may have – the world continues to be an extremely complicated place, and we are here for you.
The ability to freely and creatively communicate with clients has proven to be critical during the COVID-19 crisis. And it is this freedom that served as one of the primary drivers of the decision to establish Towerpoint Wealth as a fully independent wealth management firm back in 2017. Click below to listen to Louis Diamond, of Diamond Consultants, interview our president, Joe Eschleman, as they discuss how leaving Wells Fargo, with the help of Dynasty Financial Partners and Charles Schwab, and establishing Towerpoint Wealth allowed him to freely and creatively engage with clients and prospects, offer a much broader suite of services and products, and act as a true legal fiduciary to each TPW client.
At least 316 million people (or more than 96% of the U.S. population) in 42 states are currently under a stay-at-home or shelter-in-place order as the coronavirus pandemic continues to upend life as we know it. However, as California’s Governor Gavin Newsom stated just last month, “This is not a permanent state, this is a moment of time,” and the good news is that we are seeing hopeful time-frames for reopening:
In the meantime, our economy is in an absolute tailspin due to the national lockdown, and Great Depression-esque numbers are expected for the second quarter:
- A total of 26 million Americans have filed for unemployment benefits in the past five weeks. That translates to a national unemployment rate expected to be as high as 15 or even 20% as a result of the pandemic that has forced millions of businesses to shutter and lay off employees, significantly higher than the 10% peak seen during the 2008 financial crisis.
- The U.S. economy is facing its biggest contraction ever, as GDP for the second quarter is expected to show an annual rate decline of 40%! As a comparison, the biggest drop in growth in U.S. history occurred in 1932, when the economy contracted by 12.9% during the worst year of the Great Depression.
And while it might sound crazy to say, understanding these are nothing short of horrific numbers, there is a clear light at the end of the tunnel.
Why is the stock market (as measured by the S&P 500) up 29% over the past month? One simple answer: The stock market is not a reflection of the current economy. Investors are forward-looking and future-oriented, and they are buying in advance of, and belief in, better days ahead. It can be confounding to grasp when the current state of affairs seems so grim, but it is an essential point for longer-term investors to note and internalize. Since 1953 (with one exception), the S&P 500 stock index has bottomed anywhere from three to 11 months prior to the official end of a recession. In other words, as Warren Buffett said:
We encourage you to read Policy and Portfolio Impact of COVID-19 – A Talk With Dr. Ben Bernanke, as forceful actions by the Fed and bi-partisan Congressional stimulus packages have both led to a backstopping of the financial markets and a temporary de facto safety net for our economy.
The fact that the upcoming ugly U.S. economic figures and data are EXPECTED is especially important to note. While horrific, these numbers will come as no surprise to savvy investors, who understand that stocks almost always rebound before the economy does, and who understand that the market expects the pain experienced by the U.S. economy to be temporary. Questions remain about the shape of the economic recovery and the shape of our new lifestyles, but fortunately the correlation between the temporary nature of our economic pain and the temporary nature of our current shelter-in-place lifestyles cannot be denied.
In addition to anticipating the end of conscientious sequestering and the slow birth of economic recovery, there have been a number of non-COVID-19 newsworthy events over the past few weeks that you may have missed:
- The 2020 NFL Draft sets all-time viewership records, reaching a total of 55 million viewers over the three-day event
- Last Wednesday marked the fiftieth Earth Day celebration
- The Boston Red Sox escaped severe penalties in MLB’s cheating scandal, with Commissioner Rob Manfred concluding that the 2018 World Series champions’ sign-stealing efforts were less egregious than the Houston Astros’
- Vincent van Gogh’s Spring Garden was stolen from a museum in Amsterdam on March 30, and there is still no word on its whereabouts
- For the first time in decades, bald eagles and eaglets found nesting in the arms of an Arizona saguaro cactus
As we have mentioned previously, it is important to take comfort that better days are set to return. We will be with our full families again. We will be with our friends and colleagues again. Together. And as always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, email@example.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place, and we are here for you.
A Talk with Dr. Ben Bernanke, Former Chairman of the Federal Reserve
Our President, Joseph Eschleman, was recently invited to sit on a conference call led by Ben Bernanke, former Chairman of the Federal Reserve and PIMCO senior advisor. Bernanke discussed why recent policy moves made by the Federal Reserve (“the Fed”) and other central banks will be critical to a more stable future for the global economy and financial markets. Bernanke discussed why given today’s unpredictable environment, policy response must first focus on public health to promote recovery, and should be senior to current economic policy. To be clear, the role of monetary and fiscal policy, while hugely important during this pandemic, is primarily meant to keep things alive and to support the economy during this temporary economic downturn. The Fed has acted with alacrity in this current crisis to help support liquidity in the capital markets, help financial institutions have access to cash, and to keep credit flowing to the real economy. Domestically and globally, recovery will depend on 1.) public health, 2.) science and 3.) the public’s confidence in both. It will likely be slow, and with false starts, and it will assuredly be different across regions, industries, and businesses. And while 2020 will assuredly be a year of severe recession, our hope is that the economy will open up by the latter part of the year, especially as the medical situation improves, with growth prospects for 2021 being significantly better
Current Economic Environment
Bernanke did not waste any time pointing out that we are facing a deep global recession. And while there may be an emotional relationship between the COVID-19 crisis and the 2008 global financial crisis (primarily the stress created by uncertainty and similarities surrounding the extreme market volatility), the chain of causality is quite different. The ’08 recession was caused primarily by financial system dysfunction, which led to economic instability and weakness, while today’s COVID-19 recession has been caused not by problems in our financial system, but instead by a natural disaster bringing the global economy to a near standstill.
The good news is our banking system is strong and healthy, unlike in 2008. Debt issued by major banks and financial institutions has been backstopped by the Fed, and banks today are well-capitalized and a source of economic strength, opposite of the environment during the 2008 recession.
Today, the critical element will be public-health policy response to the pandemic, which is even more important than economic policy. Working towards a vaccine is obviously a critical step to recovery, with the purpose of monetary and fiscal stimulus to keep things alive in the shorter-term until a vaccine is ready and we can begin to get back to life as normal.
Bernanke said to expect the near-term economic numbers to be brutal, with -30% GDP and a double-digit unemployment rate here in the United States over the next few quarters. However, these unprecedented figures are expected to be temporary, and to some extent should be taken with a grain of salt. The key question: How long will the temporary shutdown last? One quarter? Two quarters? All of 2020? Longer? If it lasts through the summer, we could be looking at severe bankruptcies and permanent job losses and layoffs.
The Fed’s Toolkit
Currently, the Fed is operating at an unprecedented scale, and when compared to 2008, has already done much more, and quicker, to provide support to the economy and to the financial system. Current Fed Chair Jay Powell deserves credit for his swift decision-making, as well as his use of the monetary “playbook” that was established during the 2008 financial crisis. The Fed remains the global lender of last resort, and has already taken action to provide $2.3 trillion of loans to support the United States economy. The size of the Fed’s current balance sheet is $6 trillion (and growing), the biggest it has ever been. And while the sheer size of it concerns some economists, Bernanke was quick to point out that the Fed is acting as a lender, and not a grantor, and is lending on a collateralized basis. These loans are self-liquidating, meaning the money the Fed is loaning is being used to buy assets (bonds), which will in turn be used to then pay back the loan when the bonds mature. Over a period of time this will automatically cause the Fed’s balance sheet to shrink to a more normal level.
Additionally, the Fed recognizes that the U.S. dollar is still king, is still viewed as the world’s currency, and that the availability of dollars is critical to maintain global liquidity and to fuel global credit. Demand for dollars is very strong right now, and to satisfy that demand and to provide dollars to foreign central banks, the Fed has also opened dollar swap lines with 14 different foreign central banks, acting as a repo facility for these banks and collecting interest while doing so.
Bernanke also focused on the emergency credit programs originally introduced to deal with the strained credit conditions of the Great Depression, and utilized more recently during the 2008 financial crisis. Section 13(3) was added to the Federal Reserve Act in 1932 to expand the Fed’s lending authority beyond banks, permitting it to extend credit to individuals, partnerships, municipalities, and corporations – a type of “Main Street” lending facility. Credit markets have recently been extremely dysfunctional, and these 13(3) lending facilities have allowed the Fed to backstop the credit markets in a secure manner and reduce overall volatility. The popular Paycheck Protection Program (PPP) is authorized under section 13(3), and a $500 billion municipal liquidity facility has also been established to offer credit to state and local governments.
In addition to its lending capacity, the Fed also has monetary policy as ammunition to combat the severe economic slowdown. Short-term interest rates have been cut to zero, and the Fed is buying Treasury and mortgage-backed bonds to provide liquidity to the economy. This extremely loose monetary policy is meant to be a temporary placeholder and create an “economic bridge” until we are out of lockdown and the economy begins to pick up speed. Bernanke expressed concerns that people may start saving more and spending less after we see a loosening of the lockdown, and any additional Fed easing will be based on the pace of the economic recovery. It is going to take a while for the economy to get back on track and up and running again, with things not approaching normal in our economy until at least later 2021 and into 2022.
Negative interest rates were discussed as a possible economic policy tool in some circumstances, but the Fed is not inclined to pursue them over the near term. Why?
1. They have a very limited scope.
2. They may disrupt the money market industry.
3. They are most useful to fight deflation (see Japan in 2016), and the COVID-19 crisis is not deflationary.
4. The Fed is on record as saying they are not willing to consider negative rates.
Fiscal Policy and the Political Environment
The 2020 recession is very different when compared to 2008’s recession. It may sound surprising, but Congress is significantly more bi-partisan about today’s economic crisis than they were in ’08. Today, we are fighting a common problem – the virus; in 2008, the problem was the health of our banks, and bailing out the banks was an extremely unpopular issue. The fiscal response to today’s crisis has been very good, and Bernanke believes we will need more from fiscal policy as the economy begins to open back up. Our fiscal response is a de-facto relief package due to a natural disaster, but absolutely necessary to avoid even greater economic pain.
The United States is fortunate in our capacity to borrow, and demand for Treasuries is very high. The big question of how government can afford all of this stimulus and issue and backstop debt like this is a hugely important one, understanding the CARES Act was funded entirely by debt issuance. Bernanke was quick to note that he has no problems with what the U.S. has done to borrow substantially to stave off this crisis, especially understanding the financial burden of doing so is minimal with interest rates close to zero. Emergencies like the coronavirus pandemic are exactly why the United States has a deep debt capacity, although we certainly do need to do better longer-term planning about the structure of the U.S. budget.
Forward Guidance, Outlook and Recovery
It is clear that the shape, and extent, of the current recession will be directly correlated to the health response to COVID-19. Recovery will be directly correlated to the level of focus, energy, and resources placed on medicine, science, and public health. A vaccine may not be available for 12 to 18 months, and opening up the economy will be a slow and regional process, with false starts a reasonable expectation. How to keep proper distance between workers, and how to regularly test the work force for COVID-19 are key questions that will impact what the recovery will look like, as well as the seasonality of the virus. Hopefully the beginnings of a recovery begin this summer, although it remains to be seen if it will be “V” or “U” shaped, or possibly a more uneven “W” shape. Public confidence is key, as this is obviously a highly uncertain environment that requires caution and care. Bernanke holds hope that 2021 should be significantly better than 2020, as some of this year’s economic figures will be Depression-esque.
However, the Great Depression lasted 12 years, and we are hopeful this recession will be measured in months. And understanding the IMF made huge changes to its global growth expectations for 2020 (from +3% to -3%), their 2021 forecast is for growth of +6%.
The United States is institutionally strong (governors, mayors, CEOs, presidents of universities, etc.), having high levels of diversity and innovation. As a country, we have weathered many other crises in our collective past, each of which was unique in its circumstances and impact, and we are confident that this pandemic will prove to be no different.
How Can We Help?
Joseph F. Eschleman, CIMA®, President, Towerpoint Wealth
At Towerpoint Wealth, we are a fiduciary to you, and embrace the legal obligation we have to act in your best interests 100% of the time. We encourage you to call (916-405-9140) or email (firstname.lastname@example.org) to open an objective dialogue.
Towerpoint Wealth, LLC is a Registered Investment Adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Towerpoint Wealth, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Towerpoint Wealth, LLC unless a client service agreement is in place.
Tony has been asking top advisors from leading wealth management firms their opinions on the dual management of the coronavirus and market meltdown crises, as AdvisorHub has been documenting how leading wealth advisors are managing one of the most unique challenges we have faced as a financial community.
Click HERE to read the full article.
Six Advisors’ Highs and Lows of Working From Home
With the spread of coronavirus continuing to keep many Americans away from the office, we spoke to six advisors to find out what they like, and dislike, about working from home.
I don’t miss the decaffeinated coffee our director of operations brews.
Being a six-person boutique wealth management firm, we all get along really well together, and I miss the camaraderie that our Towerpoint Wealth family shares on a daily basis, as well as general office tomfoolery! We are serious when we need to be, but just like any family, have built a culture based in part on each of us being very good at giving each other a hard time, and it stinks not having the daily opportunity to rib someone for an honest, funny mistake that they’ve made!
Click HERE for CityWire RIA Magazine Article
The drumbeat of unnecessary, repetitive, and extraneous information and news (read: noise) will always be a constant part of our lives. The challenge is to define and identify what information is truly meaningful, and what is false or useless, and then how to deposit it into our personal knowledge bank. Finally, and we believe most importantly, is the pursuit and application of wisdom, or the ability to think and act using our knowledge, insight, understanding, and common sense, growing slowly with experience over time.
Instead of being distracted, worried, and reactionary, one of our central goals at Towerpoint Wealth is to help our clients be more confident and purposefulinvestors, which ultimately leads you to gain greater economic peace-of-mind. However, as we are all now acutely aware, the global public health and economic uncertainty surrounding the coronavirus/COVID-19 disease makes the attainment of this economic peace-of-mind a much more difficult endeavor.
Reducing and even flat-out ignoring noise is a difficult thing to do, as it oftentimes is a battle against deeply-entrenched habits. Our smartphones, our friends, and the media are regularly our greatest economic enemies, and at Towerpoint Wealth, we believe that a large part of our legal fiduciary obligation to each of our clients is to help you properly tune out. The discipline needed to filter is one of the primary determinants along the path to successfully building and protecting longer-term wealth. And as we continually nurture our client relationships at TPW, we not only set the expectation that we will be explicitly objective about the importance (or lack thereof) of newsworthy external events and the glut of immediately-available information (even if they may not like what they hear from us), but also act as an “information filter,” taking our knowledge and experience and having it translate into the wisdom our clients desire.
Please do not mistake our commentary about noise as being at all insensitive or tone-deaf to the seriousness of the coronavirus situation. More than 100,000 worldwide infections, and at at least 3,383 confirmed deaths do to COVID-19 are sobering figures, and we recognize there are many unanswered questions about what may lie ahead. Additionally, we certainly do not advocate clients walk around with their head in the sand, as it is important to have an awareness and understanding of what is happening. We simply want to help you avoid and ignore the shorter-term distractions that none of us have any control over. Put differently:
Excellent illustration courtesy of Napkin Finance
As mentioned in the Special Report we issued on February 26 (Coronavirus and the Stock Market Pullback), we firmly believe the US consumer is on solid footing, and will continue to be one of the key drivers of US economic growth in 2020, and that any drop in corporate earnings and economic activity due to the COVID-19 disease will be more than made up for over the remainder of the year. Additionally, we encourage you to click on our March 2020 Monthly Market Commentary found below for our updated outlook and details.
In summary, we think you will enjoy (and ask you to think about) Barry Ritholz’s tongue-in-cheek list below:
What’s Happening at Towerpoint Wealth?
Our esteemed Client Service Specialist, Raquel Jackson, stopped by the office last weekend to do some over-and-above work, and enlisted the help of her three daughters, Zaida (18), Zenia (14), and Daijah (3), while doing so!
In addition to filtering information, washing hands, and appreciating the good people we have around us, a number of trending and notable events occurred over the past few weeks:
- Katherine Johnson, famed NASA mathematician, dead at 101
- Doctors use the gene-editing tool Crispr inside a body for the first time in an attempt to treat blindness
- Deadly tornado cuts a devastating path through Tennesee
- Three candidates (Biden, Sanders, Gabbert) remain in the hunt for the Democratic presidential nomination
- Hachette Book Group employees staged a walk-out in protest against its decision to publish Woody Allen’s upcoming memoir
- Former MVP and fan favorite Steph Curry returns to action for the Golden State Warriors after a four month layoff with a broken hand
- Mortgage rates fall to an all-time low amid coronavirus concerns
Lastly and as always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth, and encourage you to reach out to us (email@example.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.
– Nathan, Raquel, James, Joseph, Lori, Steve, and Jonathan