June Market Commentary

Stocks posted solid gains in June, culminating in the best quarterly return since the second quarter of 2009. While market returns year-to-date remain lower through June, they have engineered a significant recovery from their March lows. In addition, according to Raymond James, this past quarter’s return is the fourth best quarterly return in the S&P 500 since 1950. Historically, after such strong quarters, they have been followed the next quarter by an average gain of 9.09%. In addition, twelve months following this type of quarterly gain, the average gain was 14.27%. While all this sounds good on the surface, and we hope history repeats itself, current events are very different, and challenges presented by the global pandemic remain at large.

Stocks have been bolstered by better than expected jobs numbers for May and June from the Bureau of Labor Statistics. The June report revealed the economy added a record 4.8 million jobs, providing fresh evidence the economy is bouncing back. In addition, the Federal Reserve has strongly committed to providing liquidity for the financial markets and providing lending support to businesses until we have passed through this crisis. Also, Congress is evaluating another round of economic stimulus to Americans, as businesses begin to scale back reopening plans and the number of unemployed workers remains significant.

As the quarter closed and health care experts worried about the July 4th weekend, it has become apparent COVID-19 cases are surging in many parts of the country. The latest surge in cases is different than the initial phase, which affected more older adults. Today, many new cases are occurring in young adults. Healthcare professionals like Dr. Anthony Fauci (director of the National Institute of Allergy and Infectious Diseases) and Dr. Scott Gottlieb (former commissioner of the Food and Drug Administration) are concerned that the recent surge in new COVID-19 cases may lead to a surge in hospitalizations. In addition, as new cases increase across the country, local governments are beginning to scale back reopening plans and closing businesses. This may contribute to a further delay in our economic recovery.

Regardless of your views about when new treatments or vaccines might be available, we believe there may be long-term implications from this pandemic. Companies in traditional retailing, sit down dining, cruise, hotel, and casino industries have been negatively impacted due to their business models based on social gathering. On the other hand, companies benefitting from this pandemic include grocery retailers, technology, and healthcare where the demand for products and services in these industries has increased dramatically based on social distancing measures and producing vaccines and treatments for COVID-19. This pandemic has clearly altered the course for many companies, some of which may be temporary and some longer lasting.

At 9258, we are evaluating the longevity of these trends and the optimal way to manage your investments based on our changing economy. We are already positioned in investments in high quality companies (mutual funds, ETF’s and stocks) with strong balance sheets, and we are hard at work identifying investment opportunities we expect to perform well into the future. With an uncertain economic environment and numerous tax law changes in 2020, we are here to discuss the most important financial matters you face. Please let us know if we can help and we hope your summer months are enjoyable.

We are available at 513.791.9258.

Tax Planning and Preparation

2020 Required Minimum Distributions – Update

As we previously communicated, the CARES Act passed earlier this year suspended all Required Minimum Distributions (RMDs) for 2020. This includes IRA/401k owners as well as owners of beneficiary IRAs. However, many individuals had already received RMDs before the CARES Act was signed into law. Some taxpayers sought to “reverse” those RMDs to avoid paying taxes in 2020 through a rollover or a replacement of those funds in the accounts. Typically that is required to be done within a 60-day window of the original distribution and can only be done once in a 12-month period.

Earlier this year, the IRS extended the 60-day rollover deadline until July 15, 2020 for distributions made after January 31, 2020. Individuals receiving RMDs in January 2020 were out of luck. In addition, the once-per-year rollover rule prevented those receiving monthly RMDs from rolling over each RMD. Finally, non-spouse beneficiaries were unable to roll over RMDs from inherited IRAs since non-spouse beneficiaries can never do rollovers. IRS Notice 2020-51 issued June 23rd provides some much needed flexibility. It extends the rollover deadline to August 31, 2020 and covers RMDs taken at any time in 2020 – including those taken in January 2020. The IRS also clarified that RMD repayments will not count against the once-per-year rollover rule. This will allow all 2020 monthly RMDs to be repaid. The IRS also carved out an exception to allow non-spouse beneficiaries to repay inherited IRA RMDs.

In the end, this Notice provides the flexibility that was intended by Congress. If you have questions regarding your RMDs for 2020, please contact us.

Ohio Sales Tax Holiday Reminder

Many states have been offering a sales tax holiday to assist families with back to school shopping and to obviously help retailers boost sales. For Ohio, the holiday will be from Friday, August 7, 2020 to Sunday, August 9, 2020. During the holiday, the following items are exempt from sales tax:

  • An item of clothing priced $75 or less
  • An item of school supplies priced $20 or less
  • An item of school instruction material priced $20 or less