Week of March 31

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Written by Ben Rosholt, Wealth Advisor

Executive Summary

This has been a week of seriously mixed emotions. The pandemic is entering a new phase nationally that has brought with it tragic, real-life, consequences. At the same time, the stock market appears to have taken a step back from the “Holy Sh**!” volatility that we have been experiencing for the last few weeks.

Initial unemployment claims reached 3.3 million for the week. That is more than 7 times larger than ANY other week in history. And even seeing is as “3.3 million” is a horrible representation of the scale. The number was actually 2,283,000. Although that is lower than the 3.3 amount, it better reflects the scale. It’s a HUGE number! That is roughly the working population for the entire state of Arizona. Unfortunately, this is unlikely to be a one-week event. Many of the companies that are currently continuing payroll while the businesses have been closed are now notifying employees that furloughs will begin next week. The cumulative unemployment claims are still far from the eventual high.

One of the forgone conclusions of the COVID epidemic is that the government will eventually step in as an attempt to boost the economy. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) produces roughly $2 trillion in relief funding, tax breaks and loans for individual Americans and businesses impacted by the COVID-19 virus.

This is one of the biggest spending bills to have passed and is aimed at providing relief to the millions impacted by work stoppages, health concerns and financial hardship caused by the novel coronavirus. The CARES Act, which will impact nearly every American, consists of six main sections: employment, individual and business assistance, support for the health care system, economic stabilization, coronavirus relief funds, and miscellaneous provisions. Here are a few important pieces.

Cash Payments

One-time cash payments of $1,200 to individuals and $2,400 to married couples. To receive the full amount, individuals must have an adjusted gross income of $75,000 or less and $150,000 or less for married couples. After that, payments begin to phase out, where the payment is reduced $5 for every $100 of gross income over the threshold. Payments will be based on your most recent tax return. (example below)

Unemployment Benefits

The CARES Act created a new unemployment payment that will be in addition to unemployment payments made by your state. This program, called Federal Pandemic Unemployment Compensation, is an additional $600 a week for up to four months. If you think four weeks in a month for four months, that is roughly $9,600. This will be above and beyond what the state provides in unemployment. In addition to unemployment, the CARES Act also adds benefits through the end of the year for individuals who work as freelancers or contracted workers and have lost work as a result of the pandemic.

There are many aspects to the CARES Act that affect individual, business and retirement planning. While time will tell as to how much the law impacted the economy, one thing is certain: most Americans will be impacted.

A three-day midweek stock surge flipped the Dow from bear market territory back into bull market mode on Thursday. Although stocks mounted a big weekly comeback, volatility remained near historically high levels. There has been a numbing effect to these numbers. I find myself watching as the stock market opens and feeling a sense of relief is the S&P 500 is down [only] 1%. This coldness is not a good thing, but clearly the body’s way of responding to truly unusual events.

[1] Investors cannot invest directly in indexes

I would like to take a moment to give you an update on Ovation Wealth Planning. We are desperately trying to work with you in a “business as usual” attitude given the challenges we face today. Our operations and tools were designed to be used in an office environment and that’s not where we are. Per the recommendations of the CDC, we have been working from home for the last few weeks. If you are having challenges reaching us via phone, please fight the urge of frustration. If it has been a couple hours without a response, please try again. Or, reach out via email. Our email system is as dependable as always.

 


 

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

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