December 2020
In this month’s newsletter, we discuss the markets, perspective on 2020, and Qualified Charitable Distributions. As we close out the finals weeks of 2020, our hope is for you and your family to find joy and happiness this holiday season!
December 2020 Monthly Market Update
December ’20 Key Takeaways
Jobless Claims Spike - Initial claims for unemployment insurance jumped 137,000 last week to 853,000, the highest level since September, and well above the consensus of 730,000. It was the third increase in the past four weeks, and the most since March, as the spike in COVID cases has begun to weigh on labor market conditions.
Continuing claims in the previous week picked up 230,000 to 5.757 million, while the insured jobless rate climbed to 3.9% from 3.8%. Both indicators increased for the first time since August, a sign of growing difficulty in finding a job. Additionally, more than 13.0 million people continue to receive pandemic or emergency unemployment assistance, which could expire at the end of 2020 if not extended by the federal government. This creates a significant headwind to the outlook for consumer spending and the economic recovery in early 2021.
CPI Inflation Remains Subdued - The Consumer Price Index (CPI) rose 0.2% in November, slightly above the consensus of 0.1%. Food prices slipped 0.1%, while energy prices edged up 0.4%, led by natural gas and electricity, while gasoline prices fell. Core CPI, which excludes food and energy, increased 0.2%, also above the consensus of 0.1%.
There were notable increases in the indexes for household furnishings and operations, apparel, and recreation. Shelter prices picked up 0.1%, led by a 3.9% rebound in lodging away from home, the most since March 2005. Rents, however, were flat, the weakest performance in over a decade, impacted significantly by the pandemic and the moratorium on evictions. Prices for used cars and trucks slid 1.3%, the most since March 2009, but that was on the back of several months of record increases. New vehicle and medical care prices also edged down.
On a year over year basis, both the CPI and core CPI were near steady at 1.2% and 1.6%, respectively. Core consumer commodity prices were up 1.4% y/y, the most since May 2012, while core services prices eased to 1.7% year over year, the slowest pace since June 2011. The goods/services inflation dichotomy has been driven by the shift in consumer spending towards goods and away from services during the pandemic. This trend was extended in November, as COVID cases surged, weighing on consumers’ mobility and engagement in the economy. A wide deployment of a vaccine could cause a reversal in this trend next year. Even so, we project only a moderate acceleration in CPI inflation to 2.2% in 2021, as discussed in the 11/24/2020 U.S. Focus.
Consumer Comfort Weakens - The Bloomberg Consumer Comfort Index slipped another 0.3 points last week, its third consecutive decline, to 49.0, led by a continued deterioration in the personal finances component. The assessment of the buying climate also weakened, while the state of the economy was steady. Following an initial rebound as the economy reopened in the spring, Comfort has stabilized in the past two months at a much lower level than pre-pandemic. It suggests consumers remain cautious, which could weigh on spending and the economic recovery.
This Is Life
What a year we have all experienced! COVID-19, Election 2020, A Depression Era Recession in the 2nd Quarter, A K-Shaped Economic Recovery, ZOOM Mtgs, Record Borrowing by the Federal Reserve, Amazon, and most importantly clients ending the year with their retirement plans intact. I do not remember a time like this in my 33 years as a financial advisor and fiduciary. Times like these are an opportunity to reflect and gain perspective. Personally…..2020 has been full of many lessons and experiences. There have been many for myself on a personal and business level. I hope by sharing a few observations with you, we can all enjoy this Holiday Season together and be grateful for where we are in our lives and how we intend to approach 2021.
COVID19 – I am excited about finally having a vaccine in distribution. I am not sure it will solve all the challenges that COVID has delivered both economically and health-wise, but I think it gives all of us a great New Years gift of hope and possibly the ability to get back to some form of normalcy.
ZOOM – A few years ago…..all of us would have immediately thought of going fast, zipping along, or breaking the speed limit when thinking of its meaning. Today…. we associate the word with cameras, video calls, and a form of connecting and communicating we never thought would be as widely used as it is today. In some ways it has replaced personal interaction, but it has also allowed us to remain connected as we socially distance. Many business colleagues and friends are using some form of ZOOM in performing their jobs, but more importantly connecting with family. It would be interesting to find out how many of us will be using this new technology to wish each other Happy Holidays or a Happy New Year!
Home Schooling vs. On-Campus Schooling – To all the parents and teachers that are coping with this new form of education – THANK YOU! I have watched my partners adjust to this new form of remote education – AMAZING! Very fortunate to work with two family-focused professionals. Teachers are being asked to do so much more, while parents of children are also adjusting to a home where no one leaves and everyone is learning how precious time away from home can be……… ; )
Choosing Positivity Over Negativity – It is very easy in this environment to simply get frustrated and focus on the “forced” isolation and changes to our day to day lives. We all have a choice every day, every week, and every month to focus on the good or the bad in any situation. So much more comes out of a positive attitude and approach. Take a moment each morning and reflect on the good you are blessed within your lives and decide how to share your attitude with friends, family, and even a stranger or two. I make it a point to say “How are you doing?” to at least one stranger a day, whether it is in a line at the grocery store, gas station or take out. It's clear people appreciate the communication.
Our Clients and Our Friends – I have said and written many times about how fortunate my partners and I are for truly great people as clients and friends in our lives and as part of our business. Whether it is my boys (Brennan, Elliot, and Evan), Regina, Linda, Michael, Dan, Tony, Gayle, Randy, Gil, Bill, Dave, Leah, Erik, Ryan, William, Jeff or Paul……. and many, many others…. this year showed me the importance of having relationships and being appreciative of those who are in our lives. Thank you to all of you, and to those I have not mentioned. You are all appreciated.
As we close out this year, we continue to focus on all we can do to help you and yours have a prosperous 2021. We are amazed at the peace of mind and comfort that has resulted from the work we have done for many of you focusing on your life goals and aspirations. It is amazing how a simple document with a probability (your financial plan) has created some peace of mind in this rather unique world forever known as COVID 2020. HAPPY HOLIDAYS!
What is a Qualified Charitable Distribution?
A qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. So, if you are 70.5 and older (or maybe have a parent or loved one who is), they can take a distribution from their IRA and send it directly to a qualified charity. This allows them to not only be charitably minded but also write off the charitable deductions even if they are not itemizing their deductions. It can also help someone who is being penalized by the higher Medicare brackets. If you considering a qualified charitable distribution for 2020 or would like to learn more, please contact us anytime.
We are here to help and offer objective advice. If you would like to discuss any of these topics or any questions relating to financial planning and/or the markets, please click below and pick a time on our calendar. Please click here.
