Towerpoint Wealth No Comments

No Outcome? No Surprise. No Problem!

We expected it to be this way, right? Historically, the market has always gotten a bit crazy both before, and after, the election:

Since Election Day on Tuesday, the S&P 500 has rallied 4%, and has enjoyed its best start to the month of November ever, up 7.4% in four days.

At Towerpoint Wealth, we believe there are a few reasons for this big jump:

  1. While investors do expect a fiscal stimulus package out of Washington D.C. in the near future, perhaps before January, the size of a deal reached in a divided Congress is likely to be much smaller than it would be under a Democratic-controlled Congress. However, sometimes bad news equals good news on Wall Street, and this had led investors to believe that more pressure will be on the U.S. Federal Reserve (“the Fed”) to pump more funds into the financial system, theoretically supporting stock prices. Just yesterday, Fed Chair Jerome Powell said more stimulus is “absolutely essential” to economic recovery.
  2. Assuming Republicans hold the Senate, the likelihood of significant increases in both regulations and income taxes is significantly decreased.
  3. Interest rate and inflation expectations have recently dropped:
         Interest Rates       
Inflation

Additionally, as the Chart of the Week towards the bottom of this newsletter indicates, gridlock has historically been good for the equity markets. And while ballots are still being tallied, and Arizona, Georgia, Nevada, and Pennsylvania remaining in focus, it does appear that Joe Biden is on the brink of victory, and that we are much closer to having a clear winner, possibly by tomorrow or Sunday. The betting markets on the Presidency sure seem to agree:

There are many reasons for us here at Towerpoint Wealth to be paying close attention to events out of our control, but no reason to be reactionary to any of them. In addition to the recent interest rate and inflation-expectation adjustments, some of the other post-election, split-Congress items bearing scrutiny include:

  1. Renewed weakness in the financial sector
  2. Growth stocks outperforming value stocks
  3. Industrial and materials sector stocks lagging
  4. The volatility of the U.S. dollar
  5. Strengthening emerging market stocks
  6. Continued strengthening of technology sector stocks
  7. Potential weakness in tax-free municipal bond prices
  8. Weakness in healthcare sector stocks
  9. Weakness in renewable energy stocks


All of these moving parts and variables can make it tempting to consider second-guessing your investment strategy and philosophy. The constant struggle between the desire for growth and protection is natural, and the goal of managing a well-diversified portfolio is to be prepared for any market environment or political change.


Ultimately, when we put aside all of those “uncontrollables,” we keep the following graph in focus (hopefully the trend is an obvious one):

What’s Happening at TPW?

The Towerpoint Wealth family enjoyed an afternoon of teambuilding and camaraderie on the Sacramento river earlier this week, taking a quick voyage on the Sacramento Brew Boat up and back to the iconic Virgin Sturgeon restaurant for lunch.

While on their adventure, they also helped our newest family member and wealth advisor, Matt Regan, celebrate his birthday!

TPW Service Highlight – Morningstar Portfolio “Instant X-Ray”

Often enough, clients ask us what stocks they have exposure to within the various mutual funds and exchange traded funds (ETFs) that comprise their portfolio. We now have a sophisticated tool available to us that not only does a deep-dive in evaluating your specific asset allocation and sector weightings, but also the actual individual underlying holdings you have exposure to.

Think you are properly diversified? There is only one way to find out for sure – ask us to run a Morningstar portfolio Instant X-Ray report, and we will dissect your portfolio to uncover concentrated positions, areas of unexpected overlap, and provide detailed insights into your portfolio’s diversification, illuminating what is truly driving your portfolio’s risk and performance.

Chart of the Week

The odds right now seem to favor a Biden presidency, a Republican Senate, and a Democrat House. The chart below, from LPL Financial Research, shows how a split Congress has been historically good for the stock market.

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, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place, and we are here to help you properly plan for and make sense of it.

CLICK Here To Download Towerpoint Wealth PDFs

– Steve, Jonathan, Lori, Joseph, Raquel, Nathan, and Matt

Towerpoint Wealth Our Team Sacramento Wealth
Towerpoint Wealth No Comments

The Great Disconnect

The U.S. econom – way down.

The U.S. stock market – way up.

Why the big disconnect?

Click below to watch our President, Joseph F. Eschleman, CIMA, discuss that while longer-term stock market returns almost always have roots in a strong economy, shorter-term market fluctuations are rarely a good gauge for the economy.

Towerpoint Wealth No Comments

Potholes in the Rear View Mirror, Smoother Roads Lie Ahead

Any concerns about the economic carnage seen in the rear view mirror were overshadowed again this morning by the hope and optimism of the economic recovery that is seen when looking out the front windshield.

Yesterday, we were not surprised to receive confirmation from the U.S. Department of Commerce that an economic contraction of historic proportions occurred in the second quarter of this year, as the coronavirus-induced shutdowns battered the United States economy:

Yes, the U.S. economy shrank by one third just in the second quarter alone. Here is a graphical depiction of this GDP plunge:

With a headline number this horrific, one might expect the financial markets to immediately tank, and panic to ensue, exacerbating the depth and darkness of the hole that our economy cratered into between April and June of this year. However, chaos, fear, and a huge selloff were anything but the case.


Three reasons why the economy tanked but the financial markets have recovered:

  1. We are coming out of the crater, not driving into it (front windshield, not rear view mirror)
  2. Demand for technology companies, and tech stocks, continues to explode
  3. A large economic/GDP bounce back is expected in the third quarter:

FacebookAmazonApple, and Google (Alphabet) all reported their quarterly earnings results yesterday afternoon, and all four companies beat already-high expectations. Facebook posted 11% revenue growth and issued stronger-than-expected sales guidance for the current quarter. Amazon’s sales soared, and operating income nearly doubled compared with the big drop that analysts had expected. Apple easily exceeded sales and profit estimates, and announced a 4-for-1 stock split. And Alphabet investors, while tolerating the company’s first year-over-year decline in advertising revenue, had sales from its cloud-computing segment come in well above expectations.

Through yesterday, Amazon is up 61% and Apple is up 31% for the year (and both stocks appear set for additional gains based on trading so far today), while Facebook and Alphabet have both gained 14% so far in 2020. Truly a historic run for these tech behemoths.

We believe this outperformance should not come as a huge surprise, given the work-from-home trend the pandemic has advanced, further accelerating technology’s leadership position; however, the pace, and scope, of this outperformance has certainly been noteworthy.

All is certainly not well for the U.S. economy – far from it. And while a full economic recovery is still a long way off (we do not expect an unemployment rate below 4% until at least 2023 or 2024), the economy is at least generally headed in a better direction. And, while assuming the recovery will be anything but a smooth ride, we are confident that we are driving away from the worst of it, and looking at a better road ahead.

What’s Happening at TPW?

For many people, spending time in Mother Nature has been a welcome respite during the COVID-19 lockdowns, and this has held true true for several of us here at Towerpoint Wealth.

Our Partner, Wealth Manager, Jonathan LaTurner, in the throes of enjoying a large dose of the great outdoors in Mammoth Lakes, hiking and fly fishing on the San Joaquin River with his partner, Katie McDonald.

Our Director of Tax and Financial Planning, Steve Pitchford, on an eight mile hike on the Salmon Falls Bridge / Darrington Trail in El Dorado Hills.

TPW Service Highlight

Are you eligible for a 401(k)403(b)457TSPprofit sharing plan, or an employer-funded defined benefit (pension) plan through your employer? Do you have a Roth option available within your defined contribution retirement plan? Have you qualified for a single or multiple grants of restricted stock units (RSUs) or non-qualified stock options? Do you have an employee stock purchase plan (ESPP) available to you, perhaps offering a discount on shares of your employer’s stock? Is employer-sponsored (group) life insurance and long-term care insurance part of your benefits offering?

We welcome working side-by-side with you to conduct a thorough deep-dive and audit of all of the various perks and benefits your employer offers. Analyzing, leveraging, and maximizing your employee benefits package could be one of the most impactful decisions you make in the service of your longer-term economic health, and we stand by ready to offer our counsel, expertise, and experience in this multi-faceted and oftentimes confusing area. Click HERE to find out more.

Graph of the Week

Investing in the stock market can be volatile. For this reason, we believe it is important to keep proper perspective when stocks rise or fall over shorter periods of time. History has shown that the odds of achieving a positive return are dramaticallyincreased the longer the investment time horizon.

We think First Trust’s illustration below does an excellent job of conveying this ideal.

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, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place, and we are here to help you properly plan for and make sense of it.

– Nathan, Raquel, Steve, Joseph, Lori, and Jonathan

Towerpoint Wealth No Comments

Singing in the Rain? The Economic and Market Disconnect

The pain caused by the COVID-19 lockdowns persists on Main Street, as evictions, foreclosuresbankruptcies, and unemployment have all soared to unprecedented levels, creating an economic storm not seen since the Great Depression. However, over on Wall Street, the sun hasn’t stopped shining since early March, with the stock market staging an amazing rally based partly on hope about the future and partly on government stimulus.

The S&P 500 has roared back from its late March depths, and amazingly, is just a rally or two away from its late February highs. The technology-heavy Nasdaq recently closed above 10,000 for the first time ever, and seems poised for additional growth as the pandemic has driven major changes to consumer decision-making and demand. For confirmation, see our previous edition of Trending Today, as well as our President’s video message about the “Big Five” technology stocks found below.

What may be most bewildering is the huge disconnect between the rapid bounce-back and advance we have seen in the stock market over the past three months and the horrific 2Q, 2020 economic numbers that, in some cases, will be worse than what we endured during the Great Depression. As we have mentioned, investors are viewing this economic pain and weakness as temporary, and banking on the fledgling economic recovery growing into a more robust bounce back in 2021. The market certainly appears to be seeing the skies as mostly sunny, as investors continue to sing in the economic rain. As the market seemingly defies the pandemic and this immense economic weakness, many investors are asking “what gives?”

We see two main reasons: Hope about the future and health of our economy, and the Fed’s massive stimulus. Investors are currently attaching more weight to the prospects of the economy (and corporate earnings) recovering than to the possibility of a long-lasting pandemic and economic slowdown. The Fed has continued to provide massive amounts of stimulus, and just this week kickstarted a Main Street lending program designed to encourage banks to lend to small and medium-sized businesses hurt by the pandemic. It also announced that it will begin buying corporate bonds to support market liquidity and help make credit available to companies across the country. Additionally, the Trump administration is preparing a new proposal for $1 trillion in infrastructure spending to help revive the U.S. economy, including funding for roads and bridges, as well as 5G wireless infrastructure and broadband for rural areas.

Is this optimism fragile, neurotic, and excessive? Or is it justified, warranted, and a signal of continued (albeit gradual) improvement and economic recovery? At Towerpoint Wealth, we agree with Liz Ann Sonders’ outlook about the market (see below), and feel that while the nascent economic recovery will continue on a long, slow, yet positive path, the market’s growth will be much more frenetic and unpredictable. However, things are beginning to point in the right direction, and it is important to drive not by looking at the rear-view mirror, but instead by looking through the front windshield. Put differently (and as Warren Buffett said), “always better to buy an umbrella when it is sunny outside rather than when it is raining.”

What’s Happening at TPW

Towerpoint Wealth continues to flourish and strategically grow as a firm during these uncertain times, due in part to the strength and depth of our client partnerships, as well as the intra-firm family-first culture we cultivate on a regular basis. As the lockdown slowly unlocks, we feel fortunate to be able to enjoy more and more opportunities to spend time with each other outside of the office as well as in.

Raquel and Jonathan “lunching” at Camden Spit and Larder this week.

Jonathan and Joseph (pre-haircut) (and John Sutter in the middle) at The Sutter Club last week.

TPW Office Update

Pursuant to the story found below, and as mandated by Governor Newsom and the CA Department of Public Health yesterday, please wear a mask when visiting us at our office. We will be!

The pandemic will be a part of our lives for the foreseeable future, but fortunately, so will getting out, spending time together (albeit with masks on and standing 6′ apart), and fostering and nurturing the relationships we have with each other. 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, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place, and we are here to help you properly plan for and make sense of it.

– Nathan, Raquel, Steve, Joseph, Lori, and Jonathan

Towerpoint Wealth Team : Sacramento Financial Advisor