We Are Talking Money

Week 12 Market Performance:Dow Jones Industrial Average: W12 +1.18%; YTD +0.38%S&P 500: W12 +1.39%; YTD +3.42%Nasdaq: W12 +1.66%; YTD +12.97% Questions Answered in this Episode:Why is personal savings so low?What are simple ways to reduce your spending and keep an eye on your budget?Best way to prepare for a recession?What does the .25% rate hike mean for the markets and the consumer?

Week 11 Market Performance:Dow Jones Industrial Average: -.15%; YTD Performance: -3.88%S&P 500: +1.43%; YTD Performance: +2.01%Nasdaq: +4.41%; YTD Performance: +11.12% Silicon Valley Bank Mission Statement: “Our mission is to increase the probability of our clients' success. For nearly 40 years, Silicon Valley Bank has helped innovators, enterprises and their investors move bold ideas forward, fast.”Silicon Valley Bank sold $21B worth of US Treasuries and Agency securities for a ($1.8B) loss after tax.Fed's response: .25 Basis Point (.25%) rate hike.What does it mean? Find out by listening to Episode 2.

2022 Market PerformanceDow Jones: -8.78%S&P 500: -19.44%Nasdaq: -33.10% 2023 Market Performance (through trading week 9)Dow Jones: .74% (YTD)S&P 500: 5.37% (YTD)Nasdaq: 11.68% (YTD)Fed SentimentJerome Powell and co. are dead-set on lowering the inflation rate to their target of 2%. My argument is that rate increases will occur well into the summer months. Consumer SpendingConsumer spending remains strong. After seeing a cooling of the metric in October, November, and December of 2022, January data jumped 1.8%. Personal Savings RateThe personal savings rate just bounced off an all-time low, but it didn't bounce high. The savings rate is still near an all-time low and it seems consumers are still on a spending spree. Consumer CreditConsumer credit is high. There is likely correlation between the savings rate and consumer credit - inversion. The savings rate and consumer credit inverted for the first time since 2008 (on a percent change from a year ago basis).  What does all of this mean? Listen to Spell Check to find out my take!

"Hey everyone, today we're going to be talking about Required Minimum Distributions (aka RMDs). Know there is a lot of material out there on RMDs but stick with me on this important topic if you have an IRA or 401(k). The rules have changed and if you are approaching retirement age, or know someone who is, you don't want to miss this episode. This subject can be both confusing and overwhelming. So, having proper knowledge about RMDs can help retirees make solid, strategic decisions. Stay tuned and I will help you unlock the benefits of your RMDs.Alright, let's get to it. We are going to cover:•What are RMDs•How to calculate your RMD•Tax consequences of taking RMDs•Strategies to minimize the tax impact of RMDs•Deadlines for taking RMDs 

Our take on the global economy, and what we expect for the duration of 2023.

The United States Debt Ceiling is a limit set by the US Congress on the total amount of debt that the federal government can accumulate. On January 19 2023, it's set to hit its limit and many people are wondering what will happen next.We also discuss some of the possible consequences of hitting the Debt Ceiling for both individuals and the country. So should you be worried about the US Debt Ceiling? Keep reading to find out, or, head over to our YouTube channel and watch the video! https://youtu.be/wDPqRk-XSqMPlus we will share with you which U.S. President paid off the national debt. Let's begin with some facts and figures about the United States debt ceiling, and how it will affect you, and all consumers. A lot of people are talking about it right now because it's been hit, but a lot of people don't really know what it is. I'm going to break it down for you in easy terms so that you can understand what's happening. After that, I'll let you know if you should be worried or not.The United States' debt ceiling is a major factor in the overall health of our economy. Unfortunately, many people overlook this important detail due to lack of understanding. The debt ceiling sets the maximum amount that the federal government can borrow, and thus dictates how much money it has on hand for everything from welfare programs to military spending. This means that if we don't pay attention to the debt ceiling, we could end up with a government that is unable to provide essential services and support. Not only can neglecting the debt ceiling lead to instability in our economy and government, but it can also open us up to risk from other countries. If the US government has too much outstanding debt, creditors may be less willing to lend us money or they might require higher interest rates. This increases the cost of borrowing and can put a huge strain on taxpayers as well as businesses and investors. Since 1960, the debt ceiling has been raised 78 times. Yet, you rarely hear people talking about it. That's because it is a complex topic that many people don't understand. So, should you be worried? Each time the debt ceiling is reached, the United States is at risk. What are the consequences of hitting the debt ceiling? Well, it could mean that the government shuts down, which would be devastating for our economy and citizens alike. Why? Well, consumer spending makes up nearly 70% of the U.S. GDP and a shut down has far reaching effects. More specifically, you could see a furloughing of non-essential government employees, delaying tax refunds, delaying social security, shutting down government funded businesses, and the list continues. In addition, credit markets could suffer, leading to higher interest rates for borrowers and a weaker dollar, which means more inflation at a time when the Fed is trying desperately to bring down inflation. So if this is such a big deal, why do we keep hitting the debt ceiling? Well, let's looks at the financials for the United States in 2022. The United States reached it's 31.4 trillion debt ceiling limit on January 19. Janel Yellen stated extraordinary measures must be taken to solve this dilemma. Does anyone know what that means? Does Janet Yellen know what that means? Her letter dated 1-19-23, she describes the actions that can be taken. The extraordinary measures currently being considered are: (1) redeeming existing, and suspending new, investments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund;(2) suspending reinvestment of the Government Securities Investment Fund;(3) suspending reinvestment of the Exchange Stabilization Fund; and (4) suspending sales of State and Local Government Series Treasury securities. These measures will continue to be evaluated on an ongoing basis. In 2022, the United States took in roughly $4.9 trillion, mostly from income tax and spent 6.3 trillion. That is a $1.4 trillion dollar deficit for 12 months. Can you imagine if you ran your household like this? Your banker would laugh you out of the bank. So where did the $6.3 trillion go? Most went to social programs and services, such as Medicare and Social Security. We need to make sure that our most vulnerable are protected, but we also need to take responsible fiscal action so that debt does not spiral out of control. So far in 2023, that is not the case. In fact, according to the Treasury.Gov, spending in the new year is already $421 billion more than collected. Clearly our country has a spending problem. Anyone that doesn't see this must not understand simple math. Keep in mind, a huge part of the problem is promises made many years ago are still being funded at the same time new promises are being made by politicians. Even so, why not just raise the debt ceiling for the 79th time? The answer is simple: we can't keep kicking the debt can down the road without addressing our out-of-control spending.  Or, as President Biden portends, we must increase taxes.  It might take a little of both!  We need to pass a budget that reduces wasteful spending and stops making unsustainable promises and then make sure it gets implemented. Until this happens, any increase in the debt ceiling will be just a temporary band-aid on an underlying problem that requires more than just a short-term fix. Now, Raising the debt ceiling and printing more money means a weaker dollar, hence more inflation. More inflation means higher interest rates. Higher interest rates mean a slower economy. Are you getting the picture now? Making things more complicated is energy prices. Let's bring this into the conversation. In the last few months, energy prices declined. This helped inflation. But I don't expect a continuation of falling prices. Why?The International Energy Agency is saying Global oil demands will intensify by 1.9 million barrels a day in 2023. A huge driver of this increase is China. Their economic stagnation in 2022 led to lower demand. This year will be a different story as their consumption continues to grow. Experts say their consumption will increase by 510,000 barrels per day. I think this will lead to upward pressure on oil, working against the Fed's mission to bring down inflation. This means interest rates may need to exceed the Fed's original plan. More rate hikes mean more volatility for the stock market and likely eliminating any chance for the so-called soft landing. It will be a miracle if the Federal Reserve pulls off a soft Landing.Here's the bottom line. We need to pass a budget that reduces wasteful spending and stops making unsustainable promises and then make sure it gets implemented. Until this happens, any increase in the debt ceiling will be just a temporary band-aid on an underlying problem that requires more than just a short-term fix. In the immediate term, you can forget a soft landing. Longer term, defaulting on our obligations become more realistic. Ultimately, out currency becomes something of the past with no value. In other words, a bankrupt country. Let's hope it doesn't go this far. At this point, I suggest you have a look at our short, and long-term financial plan. Be sure you are allocated properly among investments with plenty of savings to get you through the potential rainy-day scenarios described in the video. As markets remain volatile, don't view this as a time for fear. Instead, it's times like these that present opportunity.  Here's the answer to our trivia question. Which U.S. president paid off the national debt?In 1835, Andrew Jackson paid off all the national interest-bearing debt. He is the only president to have ever done so. Perhaps it's time for someone who appreciates no-debt to take the helm. 

Sam Bankman-Fried and FTX- you've probably heard those names in the news recently, but what actually happened? Here's everything you need to know about the recent FTX scandal and some things you can do to protect yourself from becoming a victim in similar events.

Year-end 2022 is approaching fast but in just 15 minutes we give you 10 Useful Tax Reduction Strategies that will put some money back in your pocket.

You can see a shortened version of this content in video form on our YouTube page, OmniStar Financial Group.This podcast is a publication of Omnistar Financial Group. The content is developed from sources believed to be accurate and reliable with all information. The information in this material is not intended as tax or legal advice and may not be used for the purpose of avoiding any federal tax penalties. Please consult with a tax or legal professional for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchase or sale of any security or service provided by Omnistar. Any opinions expressed in this podcast reflect those of the authors and are subject to change. Any distribution, use or copying of this video other than the intended recipients is prohibited.Omnistar has been serving clients since 1992 through deep relationships, actionable strategies, and advanced technology. Our goal is to empower those we serve to reach their goals and live their best life.Give us a call at (910) 319-7834Or visit our website at www.omnistarfinancial.cominfo@omnistarfinancial.com

You can see a shortened version of this content in video form on our YouTube page, OmniStar Financial Group. This podcast is a publication of Omnistar Financial Group. The content is developed from sources believed to be accurate and reliable with all information. The information in this material is not intended as tax or legal advice and may not be used for the purpose of avoiding any federal tax penalties. Please consult with a tax or legal professional for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchase or sale of any security or service provided by Omnistar. Any opinions expressed in this podcast reflect those of the authors and are subject to change. Any distribution, use or copying of this video other than the intended recipients is prohibited. Omnistar has been serving clients since 1992 through deep relationships, actionable strategies, and advanced technology. Our goal is to empower those we serve to reach their goals and live their best life. Give us a call at (910) 319-7834 Or visit our website at www.omnistarfinancial.com; info@omnistarfinancial.com

You can see a shortened version of this content in video form on our YouTube page, OmniStar Financial Group.This podcast is a publication of Omnistar Financial Group. The content is developed from sources believed to be accurate and reliable with all information. The information in this material is not intended as tax or legal advice and may not be used for the purpose of avoiding any federal tax penalties. Please consult with a tax or legal professional for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchase or sale of any security or service provided by Omnistar. Any opinions expressed in this podcast reflect those of the authors and are subject to change. Any distribution, use or copying of this video other than the intended recipients is prohibited.Omnistar has been serving clients since 1992 through deep relationships, actionable strategies, and advanced technology. Our goal is to empower those we serve to reach their goals and live their best life.Give us a call at (910) 319-7834Or visit our website at www.omnistarfinancial.cominfo@omnistarfinancial.com

No matter where you are in your financial journey, its never too early or too late to start planning for retirement. Dustin and Phil from Omnistar share 5 game changing strategies that will maximize your money for the future! You can see a shortened version of this content in video form on our YouTube page, OmniStar Financial Group. This podcast is a publication of Omnistar Financial Group. The content is developed from sources believed to be accurate and reliable with all information. The information in this material is not intended as tax or legal advice and may not be used for the purpose of avoiding any federal tax penalties. Please consult with a tax or legal professional for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchase or sale of any security or service provided by Omnistar. Any opinions expressed in this podcast reflect those of the authors and are subject to change. Any distribution, use or copying of this video other than the intended recipients is prohibited. Omnistar has been serving clients since 1992 through deep relationships, actionable strategies, and advanced technology. Our goal is to empower those we serve to reach their goals and live their best life. Give us a call at (910) 319-7834 Or visit our website at www.omnistarfinancial.com info@omnistarfinancial.com

It’s a contrarian’s dream come true.Contrarian investors like to buck the trend. They buy when other investors are selling and sell when others are buying.Last week, Bank of America (BofA) delivered a contrarian’s dream. BofA’s monthly survey of 225 global asset managers, who are responsible for $645 billion in assets under management, showed the managers were almost fully invested, according to CNBC.The survey showed asset managers’, “…cash levels at the lowest since March 2013, global equity allocations at a 10-year high, and a record number of respondents we are taking a ‘higher than normal’ level of risk,” according to Randall Forsyth of Barron’s.The optimism of these Asset managers’ clearly reflects central banks’ monetary policies, governments’ fiscal stimulus programs, and positive signs of economic recovery.Central bank actions are supporting low interest rates. Low interest rates encourage economic growth by making money inexpensive for companies and individuals to borrow. In the United States, the real (adjusted for inflation) 10-year Treasury yield finished last week at -0.80 percent, according to the U.S. Treasury.Government stimulus is flooding world markets with cash. “Although percentage cash levels held by investment managers are falling, they are not falling fast enough to keep up the rapid expansion of money still flooding the system…U.S. household savings at the end of 2020 were still almost $1 trillion above pre-COVID levels…,” according to Mike Dolan Reuters.Economic recovery is gaining steam. While the virus continues to be a risk, last week much of the economic data in the United States was positive. Retail sales exceeded expectations and manufacturing held steady, according to Nicholas Jasinski of Barron’s. Reuters says Economic Growth is forecast to be about 6 percent in 2021.The Commerce Department reported that 4Q20 GDP rose at a rate of 4.1%. Consumers did their part in a big way, contributing 60.8% of core demand (personal consumption expenditures, equipment and intellectual property spending, housing, exports and government expenditures). This is in line with the 10-year average. It is our thesis that U.S. GDP will recover to pre-pandemic levels by the end of 2021, but sectors will most likely recover at different paces.Yesterday Stocks fell on Thursday morning, reversing Wednesday’s gains, following mixed earnings reports and new employment data. The Labor Department said that first-time claims for state unemployment benefits fell to 730,000 for the week ended February 20, down from a revised 841,000 a week earlier and below the Bloomberg consensus forecast of 825,000.Yield Curve WideningInterest rates at the long end of the yield curve have risen sharply and we anticipate they will head modestly higher over the next few quarters. The curve (2yr/10yr spread) has steepened from 82 basis points at the start of the year to 145 basis points. While the Fed will focus more on unemployment than inflation, and has pledged to keep short-term rates low, it has less influence over the long end of the yield curve. Bond investors at the long end of the yield curve are concerned inflation may spiral out of control, especially if Congress rolls out another massive spending plan. The rising long-term interest rates and steepening yield curve hold several implications for investors. One, higher rates raise valuations on equities, and this has caused the stock sell-off over the past few days. But the steeper yield curve also signals the U.S. economy may be rebounding sharply in a few months. And the wider spread between short-term and long-term bonds is beneficial for most of the Financial Services sector.Technical Perspective:The stock market had a solid washout on Thursday, unlike Monday when growth got hit and value did okay. Net advances versus decliners yesterday totaled -2,468, the worst since 10/28, when it hit -2,566. Looking at prior washout days (those with at least 2,000 more decliners) and going back to May, most of the days were near (within a few days) or right at the bottom. During February and March, we obviously saw a cluster of terrible breadth days as the decline was relentless. Major indices found support on Thursday at the spots they hit during the first 20 minutes of Tuesday’s shellacking. At the day’s low, the Nasdaq again found support from the 65-day EMA. In addition, a parallel channel trendline (based on the top of the channel since early November and drawn off the low from 11/2) was hit perfectly in the late going. The QQQs also found support from that parallel trendline as well as a 38.2% retracement of the rally since 11/2. The S&P 500 again fell right to the bottom of the channel that has been in place since November, and almost hit the 50- day simple and exponential averages. The low of the day almost retraced a common 61.8% of the rally off the 1/29 low, and that FIBO retracement came in at 3,792. The five-day EMA crossed below the 13-day EMA by about six points; if that does not reverse, we could see some more trouble in the near term. The S&P 400 bottomed right at the lower trendline of its bull channel and right at the 21-day EMA. The Russell 2000 (IWM) declined to its parallel channel trendline as well as its prior breakout area.

Happy New Year to our clients and readers. It took a few weeks before gaining enough inspiration to write our first Market Perspectives of 2021.  The noise of politics, social unrest, pandemics, and the threat of losing free speech can leave you at a loss for words. Frankly, America has become entrenched based on agendas, ideology, and rancor being spewed from the highest offices. The very morals and ethics on which our democratic republic was created have been defenestrated in recent months, maybe years. Amid this landscape, finding something to talk about is not difficult, writing it in such a way that provides hope of solidarity, however, is nearly impossible. With that in mind, I will simply deliver the facts in a context that illuminates and educates.2020 was filled with more twists and turns than anyone imagined.  The year began with a presidential impeachment, one that seemed unusually protracted and based on equivocal evidence.  COVID-19 quickly morphed into a destructive pandemic. Social unrest ignited; protests in nearly every major city turned to violence, riots, looting, and vandalism. Since the presidential election, extraordinary events have persisted, including an ominous turn on January 6, 2021, as rioters stormed and occupied the Capitol building in Washington, DC.  Immediately, the narrative continued and the current president was blamed for the reprehensible conduct of hundreds. Immediately following this event, another impeachment was impetuously delivered, long before anyone considered the facts.  The very assault on a sitting president calls into question our own system of justice; innocent until proven guilty. Political factions tossed out words like insurrection and fascism. If nothing else, this is a good time to brush-up on history.  Fascism is something that no living American has experienced. On the contrary, we have no idea!A few weeks later, optimism about new stimulus measures from the Biden administration outweighed weaker-than-expected employment data. It is here we begin to isolate how the market is reacting and illuminate why it continues moving higher.  Jobless claims last week were reported as 965,000, up from 784,000 a week earlier and well above the Bloomberg consensus forecast of 789,000. The reading was the highest since August and may have been driven in part by the government’s recent renewal of supplemental employment benefits. But stocks were insouciant as president-elect Biden announced his proposed $1.9 trillion of stimulus. The trend of borrowing money to temporarily assuage fear will become more and more difficult to manage. Perhaps a little perspective here is necessary. US Debt is nearly $28 trillion dollars (not including Biden’s proposed spending) or approximately $222,000 per taxpayer. Think taxes aren’t going up? At some point, the right balance of taxes, interest rates, and government spending will be necessary to avert running off the cliff.None of this sounds like a time to celebrate. Just days away from the inauguration of the 46th president of the United States, Democrats will do well to immediately move towards a continuation of trying to rebuild the COVID-battered economy. Lest we forget, much of the economy was closed last year and state governors delivered ambiguous language that left many businesses in dire straits.  Emerging as a strong and sustainable economy will take time and a deft touch from political leadership. Now, add to that a divided nation where many believe the election was rigged, unifying seems more of an ingratiating tactic versus reality.  In fact, many believe President Trump is far from moving out of the picture. From an investor’s point of view, gridlock in Washington, where a single party doesn’t control the presidency and both houses of Congress, becomes a more attractive scenario.The Democrats currently have hegemony, but only by the slimmest majority in the Senate and with a smaller majority in the House compared to pre-election.  So, what now?In my opinion, cooler heads on both sides will recognize the need for new bi-partisanship. Filibuster is not to be avoided at all costs, but it should not be a means by which good government is thwarted. The alternative to bi-partisan leadership is continued acrimony and the eventual deepening of cracks in an already fragile economy. Suffice it to say, this kind of governing will require both sides of the aisle to become more concerned with facts and trust versus “being right”.Despite the ominous clouds over our country, and more recently, Washington D.C., the (non-political) outlook for 2021 offers some well-defined positives. Keep in mind, this requires putting political noise in one silo and considering the metrics that best illustrate performance of the economic engine.The economy, believe it or not, is growing and should follow solid GDP growth recorded in third quarter 2020 with an equally strong fourth quarter report.  Yes, I mentioned the unexpected rise in unemployment as reported last week, but much of the country is gainfully employed and working. The recent reversal in unemployment claims was mostly imputed to the leisure and hospitality industries. In other words, this interval is transitory. The wide dissemination of vaccines is expected to finally halt the COVID pandemic and get more people back to work.  Fortunately, living in a world of digitization, our economy has been resilient in ways that are sometimes hard to comprehend.Another useful metric is the housing market — a major pillar of U.S. economic growth pre-pandemic has been rebounding for months. Existing home sales, which were down 32% in May from January 2020, have been rising consistently since late spring and are closing in on a 100% increase from May lows. Building permits, which are a leading indicator for the industry, have lifted more than 50% from April’s lows. Prices have held up as well. The S&P/Case-Shiller National Home Price Index is one of the most closely watched barometers of the housing market and the data for October 2020 showed prices gained 7.9% year-over-year — that is the highest rate in six years. Part of this is prodigious growth is due to tight levels of inventory: currently the national average is at a low 4.1-month supply of existing homes for sale according to the U.S. Census Bureau. On the other side of the pandemic, we expect demand for homes — with yards between neighbors and no elevator buttons to press — will remain strong.Our Perspective: Avoiding the facts is simply not possible given our state of affairs. My outlook is not without risks and I realize the political rancor and division among Americans adds additional complexity to an already extraordinary set of circumstances. The damage done to small businesses will take years to repair, and more stimulus (third round is beginning) from the new administration may speed the process, but at what cost.  America is strong, resilient, and overflowing with intellect and talent. Yet, none of us benefit if we fail to recognize freedom of speech as a platform to inform those who make the rules. After all, elected officials don’t work for their constituents alone, they work for every tax-paying American.  Finally, remarkable volatility in stocks like bitcoin and Tesla could be foretelling of a frothy market. However, such bubbles appear to be limited to select risky assets.  For 2021, I expect stocks to perform reasonably well but not necessarily from the same market leaders like technology and other growth sectors. Rather, it is more plausible to see new leadership in cyclical, defensive, and income sectors. 2020 presented us with many dark days and the new year wasted no time in providing a continuation of sinister deeds. Nevertheless, we see investing opportunities and posit that timing the market, just as many tried to do in 2020, is rarely a good strategy.

Divorce has been dubbed ‘The Retirement Killer’ for a reason. Almost every time we work with a client who has/is going through a divorce, retirement accounts and the success of their overall financial plans quickly get derailed.  All that great planning that was put in place during their wedded bliss days is up in smoke. Not only are accounts split, but the couple also deals with what can be substantial legal fees leading to the finalization of their breakup. We have never met a couple that planned for these expenses. Yet, divorce rates, somewhere around 50% in America, suggests that planning for these expenses actually makes sense.  But seriously….While 80% of people get married, 50% of those getting divorced. So how can you better plan? You can start by being better prepared when you get married. Getting married, literally joining another person to become one, is a change that affects many things, including your financial plans.  You are merging what could potentially be two well laid out financial plans – the outcome is mutually beneficial, or it’s not.

Alex and David Anderson discuss the 5 Key Documents You Need for Estate Planning. Tune in to learn about Last Will & Testament, Living Trust, Durable Power of Attorney, Healthcare Power of Attorney, and Living Will.

We Are Talking Money discusses ETFs, Mutual Funds, RoboAdvisors, and other investment options.

Advanced look on life insurance were OmniStar Financial Group dives into cash value policies.

Market pullbacks, indeed, are opportunities.  But things are not as simple as saying, buy when the markets are down.  The coronavirus-induced market turbulence is affecting everyone – but how it affects you depends upon your goals and objectives. That is, if you can control your fear. After all, that is mostly what is happening at the moment, reactions based on fear.  Don’t get me wrong, we recognize that these are scary times, particularly for those in or near retirement.  Nevertheless, regardless of your age, or place in life, we consider market dips as opportunities, not threats. And speaking of fear, remember that what you hear on the news is not likely what you are experiencing in your portfolio. That’s because OmniStar investment strategies are designed to have lower beta and standard deviation than general indexes, such as the S&P 500.  Risk-adjusted return defines an investment's return by measuring how much risk is involved in producing that return, which is generally expressed as a number or rating. We apply this to every client portfolio to ensure risk is reduced as much as possible without sacrificing total performance. For example, many of our clients in recent weeks have experienced losses of approximately 10% while the S&P 500 is down nearly 30%.Let’s cover a few points before we move ahead. The impact of the coronavirus on the economy continues to escalate which calls for adjusting GDP estimates. Oil prices have fallen to $30 per barrel, which warrants a lowering estimates of capital investment into equipment. President Trump has banned travel to Europe and sports leagues have cancelled games, tournaments and seasons, leading us to rein in expectations for personal consumption expenditures on services such as flights, hotels and restaurants. Recessionary conditions in Europe and Japan will slow export growth. As well, the end of the bull market is likely to short-circuit consumer confidence, with a potential negative impact on auto and home sales. With those points, let’s go ahead and answer what has become the most repeated question from our clients.Should we move to cash? The short answer is no.  Moving to cash has many negative implications.•             You no longer receive dividends•             Covered call premiums are not possible•             Trying to time re-entry is a long shot•             You lock in current lossesI want to share salient points from a client call this week. Our discussion focused on their decision to move into cash. During our conversation, they shared a story of a friend who served on the executive team at Delta Airlines. Their friend advised them to purchase shares last year at a time when the stock was trading near $67 per share. They went on to say how Delta was well-positioned and “when we get through all of this, Delta will benefit”. Indeed, we agreed. However, they didn’t realize shares of Delta were trading down nearly 50% from just a year ago, yet their confidence in Delta was not compromised. All of sudden the realization struck that Delta is not the only company that will benefit when we get past the current pullback. Moreover, they realized staying invested makes sense if we believe companies will survive and do well as COVID-19 moves to the rearview mirror.Again, we recognize these are scary times.  But hang on and you will see where I am headed.  I don’t want to state the obvious, but we expect the economy to contract during the second and third quarters, of 2020 and likely begin to experience some recovery in 4Q with more appreciable improvement through 2021. We might as well use the R word.  They are part of our economy and they cannot be escaped.However, the last 11 recessions have averaged 11 months in duration. A potential silver lining this time around, we think the recessionary environment will be shorter, given the strength of the economy prior the current conditions.  It appears likely that the virus will be contained in a relatively brief period. For the last part of February and at least through the first third of March, the stock market could be described as tumultuous, to say the least. The S&P 500 Index, the Dow and Nasdaq have fallen precipitously. In some cases, indexes are down by nearly 30%. While the Coronavirus is somewhat to blame, we view it as more of a catalyst that caused a fear-trade. Prior to the Coronavirus outbreak, the following criteria set the stage for a market correction in 2020. •             Markets priced to perfection•             Corporate earnings were peakingStocks trading above fair value•             PE ratios high suggesting overvalueWith the Coronavirus tipping the markets into a sell off, the Fed has implemented the following to reduce financial impacts.•             The Federal Reserve cut rates by 25 basis points in an emergency meeting•             The Fed has now taken rates to near zero.Going to cash and sitting on the sidelines means you miss some of the best up-days, which are needed to offset the down-days. Consider these history-making days and you I think you will appreciate why staying invested  is usually the best course.  This covers trading days from February 24th through March 18th:•             Those trading days saw 7 of the 9 largest one-day-point-losses for the Dow in history•             Those days also saw the two best-one- day-point-gains for the Dow in historyIs opportunity knocking? :If you are retired or some other life event has forced you to live off of your savings, naturally, you are nervous, the headlines and histrionics of media commentators are enough to scare the bravest of souls. They can quickly take away confidence.But consider heeding the words of the legendary investment manager John Templeton, who famously counseled, “Buy when there is blood in the streets.”I want to share some important numbers from One of our strategic resources, ARGUS Research. They have adjusted their outlook and expect approximately 10% annual decline in continuing operations earnings for 2020, bringing the earnings per shar on the S&P 500 to approximately $146. On that basis, they lowered their 2021 forecast to $162, from a prior $180. On the lower EPS numbers -- and in the wake of Monday's sharp stock sell-off – their market valuation model is indicating stocks are about 16% below fair value. Certainly, an argument for buying. So, where will the market be at the end of 2020? We think it is highly probable to be in a range of 2800-3300. Global GDP growth rates are also expected to be revised downward by economists. The International Monetary Fund initially set its forecast for global growth in 2020 at 3.2%, up from 2.9% last year. We estimate that the cutbacks in China alone — where growth had been forecast at 6% for the year, but may come in closer to 2% — could reduce that 3.2% rate down toward 2.5%.  Adding the fact that Japan’s economy contracted 6% in the latest quarter and that Germany has been flirting with recession for the past year, 2020 is likely to be the slowest year for growth since the financial crisis years of 2007-2009.  Central banks around the globe are moving quickly to provide aggressive measures - fiscal stimulus programs are definitely part of their conversations. We note that budget deficits are already high, as a percentage of GDP, for the U.S. so our central bank is dealing with an already difficult scenario – COVID-19 has added yet another layer of complexity. TechnicalsThe S&P 500 plunged 12% on March 16, its worst one-day decline since the crash of October 19, 1987. From its all-time high on February 19, the index, as of that date, has plunged 29.5% in just 18 days, also the worst decline since 1987. The index closed at 2,386 and is rapidly approaching key chart support near 2,350 from the lows in December 2018. Interestingly, that area also represents a key retracement of 38.2% of the entire bull market since 2009. We view this as a very important area and will closely watch how well the market manages to hold this level. Maybe we hit a panic low on 3/16, but we really don’t know yet. Let’s agree, the market has a long way to go to dig itself out of this mess. Also making a case for the bottoming process, we are back below the 200-week moving average, as well as what we consider to be the bull market trendline. Both of these longer-term supports are near 2,650. The risk/reward seems very favorable based on market sentiment and market breadth. Moreover, bear markets never end on good news and market bottoms tend to occur before the economy turns positive. Other indicators of a returning bull are stocks trading at a discount, unusually high dividends, and heavy trading volume. All of these elements are in place. The 14-week Relative Strength Index (RSI) is extremely oversold, in fact, this is the most oversold the “500” has been since October 2008.In our opinion, we have seen the worst of this capitulation and now it is only a matter of time before stocks begin to move higher.  The key is a sound investment policy that allows a cushion – money market funds, dividend paying stocks, selling covered calls, and other safe and low-volatility repositories that allow you to avoid selling stocks at low levels. If you are a client of OmniStar, you can better appreciate our focus on value stocks with good dividends and reasonable P/E ratios. Such holdings are less aggressive and have a history of lower volatility. Your investment team is working diligently to rebalance portfolios that have been thrown askew over the recent volatility. Your portfolios are being brought back to their intended balance of equities and fixed income. This is a necessary step in staying the course during volatile markets, and an opportunity to score equities trading lower.Keeping the Big Picture in PerspectiveNo one likes to see markets continuing to set one-day point-drop records. And while the media continues to scream that the sky is falling, let’s think for a moment- it’s not.Remember through the first few months of 2020, we see:•          Low and declining energy costs •          Low interest rates•          Low inflation•          Easy monetary policy and more aggressive measures being implemented•          Low unemployment (50-year low)•          Stable housing market•          Banks in solid financial condition with strong balance sheetsGiven the pre-coronavirus strength in our economy, now is not a time to abandon long-term investment plans. We maintain that shifts in the economy can, and often do, present buying opportunities. The world is witnessing widespread shutdowns and quarantines, measures that have never been seen outside of wartime. These conditions will reduce economic growth and increase the odds of a recession. In fact, we surmise a recession is already in play. However, the aforementioned points suggest we will see a much quicker return to normalcy as compared to other recessionary times. At this point, we are planning for a sharp economic slowdown, but we are confident it will be short-lived.Bottom Line: The sky is not falling as winter 2020 comes to a close. But metaphorically, we are not immune to stormy conditions from time to time. These periods serve to remind us why the proper gear is necessary. In this case, the proper gear is a comprehensive wealth management strategy and a team of professionals to help you stay on course. Having a plan provides peace of mind because the planning includes conditions just like those we are experiencing today. Market vicissitudes are not new and they will always be part of investing. In closing, stay calm and avoid emotional impulses that may not be justified. Remember, impetuous decisions based on the medias passion for selling fear is not a strategy. Try to avoid obsessing over things that are unlikely to derail a well-designed strategy.  Thanks for joining us and we will see you soon on We are talking money. 

Update on marketsThe progression and measure of financial markets in response to the coronavirus outbreak has been reminiscent of the 2008 global financial crisis.  Now, let me be clear, we do not believe this is a repeat 2008. What we do believe, however, is the impact from Coronavirus will likely be large but the economy is on more solid footing and, importantly, the financial system is much more robust than it was leading up to the crisis of 2008.  I don’t want to sound overly optimistic, but in our opinion, we believe investors should be level-headed, remember that investing is a long-term strategy, and stay invested. Let’s face it, the future evolution and global spread of the coronavirus outbreak is highly uncertain. What we know is that containment and social distancing are ultimately achieved by reducing economic activity. Faced with resource constraints in healthcare systems, a number of strong incentives are in place to encourage aggressive containment of the virus. The impact on economic activity will likely be sharp – and the damage may be deeper than anticipated, but the outbreak will eventually dissipate. The BlackRock Investment Institute concluded that now is the time for a decisive, pre-emptive and coordinated policy response to avoid the disruptions to income streams and financial flows that could cause persistent economic damage – failure to act could end the current economic cycle.The coronavirus, discovered in late 2019, had no impact on 4Q19 GDP, but we are confident in saying it certain to push GDP growth down in the first two quarters of 2020 and possibly the last two quarters. Here’s what we know about the virus as of today, March 11th.  There are 125,000 reported cases worldwide, 4,600 deaths and approximately 70,000 have recovered. Now, let’s compare severity of Corona to influenza.  In the U.S. alone, 16000 have died from the flu and approximately 280,000 are hospitalized.The mortality rate for the flu is significantly higher – perhaps American’s should be more concerned about flu shots than coronavirus. The rate of infection appears to be slowing in China but continues to grow rapidly in other countries and the impact of the virus on regional and local economies has been intense. The latest quarterly growth rate in Japan was -6%. We cannot confirm how Chinese industries are operating, but word on the street is something around 20% of capacity. Key Segments of the EconomyFor the moment our economy continues to operate and stock markets remain open. Nevertheless, Investors anticipate a slowdown in U.S. growth – some even proclaim a recession – and a stagnation or outright decline in corporate earnings. Before you start believing this hyperbole, let’s look at key segments of the economy and the potential effects of coronavirusFirst, the consumer segment is divided into three parts: those are spending for durable goods, nondurable goods, and services. Services is the largest and makes up about 64% of consumer spending. Some of you are probably asking, what is included in services? Well, housing and utilities, healthcare, financial services, recreation, transportation, food services, and accommodations. The coronavirus is already disrupting these service providers, particularly transportation, food services and accommodations. Just as you might expect, our outlook for this segment is much lower for the next two quarters. Spending on nondurable goods accounts for approximately 25% of consumer spending, and spending on durable goods accounts for 13%. Our opinion is coronavirus will affect supply chains and that is likely to lower durable goods spending over the next two quarters. Therefore, we our outlook for this segment is also lower.  Spending on nondurable goods, such as food and clothing, seems like an area that will be less affected. In fact, we are confident that growth will likely be the outcome for the next few quarters. Next is gross private domestic investment (GPDI). This segment was poised to recover from the partial resolution of the trade war, but the coronavirus will likely depress results for at least the next two quarters. The main components of GPDI are investment in structures (15% of the total), equipment (37%), intellectual property products (29%) and residential (18%). Investment in structures has been the hardest hit by trade tensions; with the onset of the coronavirus, we do not look for a turnaround in the near term here. Investment in equipment has also been weakened by the trade war; again, we do not expect this trend to reverse in the current environment. The strongest component of GPDI has been intellectual property products – software, R&D, entertainment. With people staying at home, this spending will likely be less affected by the coronavirus. Residential may be a mixed bag. Some homebuilders are already facing supply-chain slowdowns, but low interest rates should support demand. The third major segment of the economy is import/ export, and I want to emphasize a few things here. On the whole, we believe this segment will dramatically affected by the coronavirus. Now, let’s go through this carefully because the math works differently in this segment. First, we expect a slowdown in exports – that is, goods and services sold to other countries – clearly a negative for the U.S. economy. Imports, on the other hand, subtracts from U.S. economic growth. That means as imports from countries affected by the virus are reduced, the result is positive for U.S. economic growth. The fourth and final segment of the economy is government spending. After years of sequestration in Washington, the federal government has been accelerating spending in the past year. Also, considering that this is an election year, we look for the strongest economic growth trends in 2020 to come from government spending. All in all, we have lowered our economic growth forecast for 1Q20 to 1.5%, and look for only 1.9% growth in 2Q20 and for the year as a whole. The onset of the coronavirus is one thing. The reaction to the coronavirus could be something else entirely. The virus could elude containment, or mutate, and lead to stricter quarantines, effectively shutting down the economy. The next several weeks will offer clues on this, as the growth rate of new cases in China appears to be slowing. But even without a harmful mutation or an upsurge in cases, our current estimates could face downward revision if consumers and businesses cut back sharply on travel and consumption. Make no mistake, that is a real risk that is hard to accurately quantify since no one can predict what the reaction is going to be. At this point, investors have reacted by moving to risk-off investments, such as Treasury bonds. The yield curve has inverted again, and the Federal Reserve lowered rates and talk is on the table about additional cuts.  In our opinion, however, we don’t see this as a prudent move – what does it solve?  Let me put it like this - the Fed’s rate cuts are designed to increase demand, but the current economic weakness is coming from the supply side, not from a lack of spending.  In fact, consumer spending remains healthy. With all due respect, cutting rates cannot fix supply issues.   Our view is the Fed has very few tools at this point but a decisive and pre-emptive policy response could go a long way.  Given the uncertainty around what will likely be a significant economic disruptor, we think a sooner than later attitude is appropriate.  Assuming we have fiscal stimulus from the White House, it likely includes things like more spending to rebuild the nation’s infrastructure instead of simply focusing on tax cuts. President Trump cleared the first hurdle in what I believe is the most important of the solution, he signed into law The Coronavirus Funding Bill. One of the most critical parts, however, is survival of small business. This segment of business represents the largest part of employment so they must be supported. Production disruptions and financial shortfalls can lead these small, but valuable employers to extinction.  Bottom line, explicit fiscal policy could help us avoid our next recession. Insider TradingStocks remain on a wild ride that mostly goes down. Yet something else also is taking shape: exceedingly bullish insider sentiment in the midst of broader market pain. When the market carnage started, corporate insiders looked the massive selling right in the eyes and responded by buying. Now, with the stock-market decline gaining momentum, insider-sentiment data from Vickers Stock Research shows that insiders are buying up shares and the volume is convincing. This gives additional weight to the sentiment that comes from those transactions. We are not saying that insiders have a crystal ball, but assuming this health crisis follows the same path to resolution as those that came before it, insiders seem to see value in the current pricing of stocks. We have been talking with clients over the last few weeks and continue to remind them that now is a time for to keep a long-term perspective. Part of the comprehensive planning that we deliver considers major events.  Stress testing for our clients is one of the best values we provide and should provide comfort during periods of unstable markets and economic disruptions.The ultimate depth and duration of the coronavirus impact is uncertain, but we remain confident that its grasp is transitory, this outbreak will dissipate and economic activity will normalize. In the meantime, we are staying invested as our strategies are designed for long-term investors.  Now, don’t misconstrue that message.  We are very active and continue looking for value throughout the markets.  We are trimming positions and buying new positions in an effort to better position ourselves for a rebound.  Moreover, our rebalancing strategies provide opportunities that call for reducing over allocated asset classes and redeploying those proceeds to areas that offer better value.  Let’s round out the call with a look at the TechnicalsWhen it comes to technical, you can quickly get lost in the multitude of charts, oscillators, trendlines, and ratios.Knowing how to interpret these so-called signals presents yet another problem.  Well, we are going to provide a few simple thoughts on what the technical are saying and avoid the cryptic jargon that leads to a lot of confusion. First, let’s look at the VIX (or volatility index). This index is often called the FEAR INDEX.  When it moves higher, stock prices generally move lower.  When the vix moves lower, stock prices tend to move higher.  At this point, the VIX is trading at well above average levels – naturally stock prices are moving lower.  So how can this FEAR INDEX help us read the markets.  Well, in our opinion, this single metric cannot accurately call tops or bottoms.  Instead, we believe it is best used in combination with other indicators.Separately, it should be used to determine above average risk and below average risk. Next, puts and calls (also known as options) can provide some idea of how traders are looking at the near term trading environment.When we divide the number of puts by the number of calls, we get a ratio that is easily charted.  When this ration rises, the market is expected to move lower.Presently, this ratio remains elevated, much like you would expect. That suggests a bearish sentiment.Lastly, let’s talk about the Stocks to bond ratio.  Just like puts and calls, a ratio of stocks divided by bonds provides some indication of overvalued and undervalued assets.  The recent plunge in stocks and the parabolic move in Treasuries moved the stock/bond ratio to one of its most undervalued positions for stocks, and one of the most overvalued positions for bonds, and I am not talking about looking back for a few years.  Actually, I am talking about five decades. Now, some of this is due to historic plunge in yields. On the bearish side for stocks, some breadth indicators have become so oversold that they have moved to potential danger levels for stocks. The percent of S&P 500 stocks above their 200-day average has fallen to 17% as of Monday’s close. The worst market declines tend to come when this breadth measure is below 45%.  So, what does all this mean? Well, to sum it up, stocks have clearly moved into a bearish mood and bonds have been exceedingly bullish on a relative basis.So, from a technical standpoint, we believe that stocks may have a little more downside before things improve.Bonds, conversely, appear overvalued with very little room to move up in value.  Depending on your capacity for risk, this could be a good time to rotate some of your fixed income to stocks.  Yes, I know this sounds counterintuitive.  That’s because it is opposite what seems natural.  Think about it like this, when stocks move higher, is it perfectly normal to rebalance – sell some higher priced stocks and buy some undervalued bonds.  In this case, stocks are under-performing and bonds are outperforming.  Shaving some of the gains from bonds to buy stocks have sold off in recent weeks is nothing more than rebalancing.  Except in this case, the asset class that outperformed happened to the one that is expected to underperform. Roger, thanks for joining me today. Until our next podcast, remember to stay calm and avoid emotional impulses that may not be justified. Remember, impetuous decisions based on the medias passion for selling fear is not a strategy. Try to avoid obsessing over thinks that are unlikely to derail a well-designed strategy.   If you don’t have a strategy, contact one of our associates. We will see you next time on We are Talking Money.     

This is our second podcast dedicated to COVID-19 (coronavirus) as renewed fears dragged stock prices down last Friday and again on Monday, February 24th. The dow jones industrial average closed down more than 1000 points. The rising coronavirus fears are likely resulting from significant new outbreaks in Italy, South Korea, and Iran. Political rhetoric from Bernie Sanders over the weekend likely added fuel to the sell-off in health insurance stocks – Senator Sanders won the democratic primary in Nevada on Saturday where he described his Medicare for All – calling for the elimination of private insurance.Stocks staged an impressive rebound from initial coronavirus fears, but concerns about the global economy are compounding as the virus spreads to many continents and countries. Companies ranging from Apple to Ralph Lauren to Procter & Gamble have cautioned that upcoming earnings will be impacted by slowed retail sales and supply chain disruptions. These companies are proof that effects of coronavirus are moving beyond the more obvious travel-related industries like airlines and cruise ships. The classic risk-off response several weeks ago was quite modest but we said in our first podcast that “no one has a crystal ball when comes to pandemics or epidemics”. Just like then, we have a world filled with emotion, and emotion is driving much of what we see at the moment. I think it is important to consider two behavioral emotions – first is confirmation bias and the second is known as a herding bias.Confirmation bias is simple, we make decisions based on information that reinforces what we believe. Herding bias is just like it sounds. We tend to follow the herd, regardless of where and why it is moving.Over the last several weeks, the leading question is whether the economic and profit impact of coronavirus will be more than a one-quarter event. What we know so far is emerging market equities, airlines and oil prices have continued to cool since the day Chinese officials confirmed the virus can spread from person to person. Now, the not so obvious companies are beginning to feel the effects of supply chain disruptions and slowing retail sales. Even with this recent bout of selling, stocks remain near record highs. On the other hand, gold, bonds and commodities are suggesting increased fear and a more-sluggish period of economic activity over the next few months.Ultimately, we expect the virus impact to take the path of other major outbreaks, that is, a short-duration impact). Lest we forget, the Fed’s low interest-rate policy and rebounding corporate profits, in our opinion, continue to offer a sound long-term backdrop for stocks. Also, 437 S&P 500 companies having announced fourth-quarter earnings, it is our understanding that 71% of those companies have exceeded the consensus, above the long-term average of 65%. Basically, if the current trajectory holds, the final result versus expectations will be among the strongest of 2019.Giving a little more confirmation to stable economic conditions, the Empire State manufacturing index rose sharply to 12.9 in February, up from 4.8 the prior month, with strong gains for both new orders and shipments -- although the component for future business conditions was essentially unchanged. Housing starts remain strong and new home permits were up a strong 9% in January. Consider rising home permits, higher consumer confidence, reduced unemployment applications and high stock prices, it is unlikely that we are headed for an extended sell-off. However, I should mention that the producers manufacturing index feel to 49.4 in February. Anything below 50 is said to indicate contraction in the economy.This is the first time we have seen this number below 50 in four years. There is no question that coronavirus is starting to impact several industries.On the whole, we expect the economic damage from coronavirus to be moderate and mostly contained. In our opinion this means the economic rebound is not being derailed, rather it is more akin to a delay. From our view, additional disruptions to global economic growth will occur in the next few months, especially as it relates to manufacturing and trade. But, keeping this in perspective, we are talking about a change in global GDP or .2 - .3%. You should also be aware that the most severe damage is occurring in the Chinese economy - according to Reuters, analysts expect the outbreak to cause significant damage to China’s growth in the first quarter and hinder their global trade for months to come.Europe is also feeling significant effects due to their export-oriented economy. Finding a silver lining in all this chaos and distress seems improbable. But consider this, all these economic worries have driven bond yields to near record lows. In fact, 10-year yields have landed at 1.38%. If nothing else, yields at these levels most likely delay any possible shifts to tighter monetary conditions. As we see it, Central banks around the globe remain extremely accommodative  despite resilience in the service and consumer sectors.In our first coronavirus podcast we shared a number of things gleaned from other global disease epidemics. You may recall what we found was encouraging - economic growth and markets have historically responded with a V-shaped pattern. Our research showed that initial reactions tend to include a slowing of consumer spending with a rebound that happens almost as rapidly as the downturn. Pent-up demand eventually helps fuel the rebound. History tells us that recoveries are typically led by retail and manufacturing sectors. It is safe to say that reduced flow of people and goods due to travel restrictions and quarantine measures are already affecting demand in the short term and that trend will likely continue for a few months. Similar to the 2002/2003 SARS epidemic, the fear of slower global growth is plausible but we firmly believe this is transitory.Coronavirus is a serious threat with the potential to create catastrophic results. As with any outbreak, gauging the impact will take time. The severity of this outbreak will bring significant consequences but according to the Johns Hopkins research, we are beginning to see what appears to be a slowing of new cases and recoveries are rapidly increasing. That’s not to say we are out of the woods, but the virus is being hit with vigilance from all corners and the results are positive.From our perspective, we remain more optimistic about longer-term growth prospects and most investors and consumers seem to believe that central banks will remain accommodative, helping avoid recession, despite coronavirus-related risks. Of course, there is always the chance that we are overly complacent and confident. At this stage, the sell-off is not overly concerning and, in fact, we will not be surprised to see additional volatility and more corrective selling. Still, we don’t see any near-term catalysts that would cause a recession or end the equity bull market.Bottom line: We still see global growth edging higher this year, given easier financial conditions, a break in global trade tensions, and generally positive economic data. 2020 kicked off with an encouraging start but predicting a virus would be impossible and the markets were priced to perfection. So, why is everyone so edgy and disappointed – corrective selling is a natural part of investing. Nevertheless, emotions get the best of most people and we quickly forget about long-term strategies and focus on every minute. The corona virus outbreak has reached more than 80,000 confirmed cases and some 2,700 deaths. Conversely, total recoveries have risen to nearly 28,000 as of this podcast. Though transitory, outbreaks such as this creates downside risks to our optimistic outlook for continued growth. For the near term, we believe U.S. Treasuries are severely overvalued, thus keeping interest rates lower. For longer-term investors, we feel that opportunities are presented when stock prices decline. Nevertheless, market declines should not be considered a universal endorsement to buy. Rather, it is an opportunity to looks for companies with strong balance sheets, those capable of sustaining during recessionary periods. What does it mean for OmniStar strategies? Basically, when anxiety increases, implied volatility also increases. This provides an opportunity to deploy sidelined assets, adjust strike prices in our option strategies, and monitor our strategic allocations. What it doesn’t mean is knee jerk reactions. Volatility can be our friend, as long as emotional behaviors are kept at bay. One thing we do know from recent trading history: every time the VIX has doubled, since 2012, buy opportunities were created.

Over the last several weeks, many clients and alliances have been asking for our opinion on the corona virus outbreak and its effects on the economy. In reality, what everyone really wants to know is “how is this corona virus going to affect my investments?” Since the outbreak, we have experienced a classic risk-off response, albeit relatively modest to this point. No one has a crystal ball when comes to pandemics or epidemics.  What we do have is a world filled with emotion, and emotion is driving market conditions – basically some selling of stocks and buying of bonds. What we know so far, emerging market equities, airlines and oil prices have cooled since Jan. 20, the day Chinese officials confirmed the virus can spread from person to person. Perceived safe-haven assets such as U.S. Treasuries, as well as their inflation-protected peers, have gained in value and yields have continued to fall. Our assessment is further confirmed by the Volatility Index (VIX) which is widely used as a gauge of U.S. stock market volatility. It reached its highest level since October 2019.  In spite of these signals, risk-off sentiment has been relatively limited, with modest pullbacks in high yield credit and U.S. stocks. That is most likely due to mostly positive results in the current quarterly earnings season - so far results are in line with expectations for global growth to edge higher throughout 2020.Anyone who works with our firm knows that research is a key element in everything we do. Naturally, the corona outbreak led us to glean from other global disease epidemics.   What we found is encouraging - economic growth and markets have historically responded with a V-shaped pattern. Initial reactions tend to include a slowing of consumer spending while assessments are completed.  It doesn’t take long for a temporary economic decline to be felt across the globe.Now, the rebound in a v-shape pattern tends to happen rapidly much like the downturn. Pent-up demand eventually helps fuel the rebound. History tells us that recoveries are typically led by retail and manufacturing sectors since many service sectors simply cannot replace lost revenues. We are talking about things like tourism. As with any outbreak, gauging the impact can’t happen overnight due to so many unidentified factors related to the corona virus. Think about it for a moment, we hardly know the duration of this virus or the severity of the outbreak in China – and whether it remains largely contained geographically. What we can say with confidence is reduced flow of people and goods due to travel restrictions and quarantine measures are likely to effect demand in the short term. Similar to the 2002/2003 SARS epidemic, the fear of slower global growth is plausible. We are still waiting on Chinese authorities to provide more evidence of a slowdown in the growth of this virus.  When that response comes, one of the key factors will be how much stimulus China will apply to this crisis.  In our opinion, this is a very important part of the solution.  This situation is different from others in that China plays a huge role in the global economy: in fact, China makes up 15% of global GDP today in purchasing parity terms. Incidentally, that is three times its size in 2003, when the world was hit by the SARS virus. Similar to the SARS epidemic, investors fear that the current outbreak could hurt economic activity and ultimately slow global growth.Putting this into perspective, China is a key component of global supply and failure to control the outbreak could disrupt the supply chains of certain industries, with potential for bottlenecks. Ordinarily, and this is not intended to diminish the severity of corona virus, we would classify this as an isolated event.However, we must keep in mind that potential shifts in economic regimes may happen this year, which could further exacerbate a situation like corona virus – in other words, growth slows and conditions worsen if inflation begins to move higher. Add to this puzzle a flattening yield curve in recent weeks, markets could be signaling that our Fed will be inclined to cut rates more than one time this year. Bottom line: We still see global growth edging higher this year, given easier financial conditions, a break in global trade tensions, and generally positive economic data. 2020 kicked off with an encouraging start due to the latest quarterly earnings season. Of course, we admit our viewpoint could be overly optimistic but the data supports further growth. The corona virus outbreak, though transitory, creates downside risks to our optimistic outlook for continued growth.  For the near term, we believe U.S. Treasuries may provide a source of portfolio balance against any growth scares and market declines could provide opportunities for investors seeking riskier assets.  Until our next podcast, remember to stay calm and avoid impetuous decisions based on the medias passion for selling fear.   

A recap of 2019 and outlook for 2020 - Where we've been, where we are, and where we may be headed.