Bring on The Test

Bring on The Test

For the first time in what feels like a very long time, there is a sense of calm amongst us in both the financial markets and society.

The financial markets have calmed noticeably.  After a very erratic and scary few weeks, they are now operating very efficiently, even on what is now normal 500 -1000 point swing days.

Socially we have all come to grips with the crises and resigned ourselves of the necessities. There is a collective sense of “we are in this together”. Common courtesy and decency have returned to society, well at least to the grocery stores. Unfortunately, that’s the only place I can see people these days.

There are typically three phases to steep market declines. I have listed them below with help from Market Analyst Tony Dwyer:

  1. The first Phase is the Panic Phase where shock sets in, headlines are terrible and investors fear the worst.
  2. The 2nd Phase is The Relief Rally phase where traders take advantage of the extreme oversold and hope the economic impact isn’t as bad as feared. This was the economic monetary and fiscal stimulus announcements giving the market a nice rally last week
  3. The 3rd is The Frustration Phase  where the reality of the economic news sets in and we test the low due to the reality of poor data.

There is a strong debate going on now on whether this will be a V-shaped recovery where we bounced off the low already, or a W shaped recovery where we test the low one more time before we make a strong rebound. The latter is the much more normal scenario and looks like it will probably win out.

No matter which we get, a single bottom which has already been made or a test of the old low, the inevitable recovery from this “Great Reset” will be extremely powerful and stocks will recover very strongly. If we do see another painful capitulation type sell-off, don’t be shaken and maintain your discipline. Panic selling at the bottom only locks in your losses. The markets will come back as they always have, and likely stronger than usual with all the stimulus being thrown at this. 

The new Coronavirus stimulus package is providing 2 relief opportunities to retirees.

  1. There is no RMD requirement for 2020. This also includes old inherited IRAs.
  2. A person younger than 59 ½ can pull up to $100K out of their IRA to pay for coronavirus related hardships which include job loss. The taxes on this can be avoided if the person puts the $100K back within 3 years (basically an interest-free loan from your IRA). In addition, the taxes can be spread out over 3 years if the person can’t pay it back.

We really are all in this together, and together we will overcome this both emotionally, and financially. I am working tirelessly to understand and maneuver these markets, and take whatever action is necessary in these trying times.

If you need me for any reason, do not hesitate to contact me. I am still working at the office, with a skeleton staff, and we are there for you if you need us in any way.

Thank you for your trust, confidence, and friendship.

“Invest for need, not for greed!”

Sincerely -Keith


Smart Money Newsletter

Written By: Keith Springer

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