March Market Commentary

March proved to be another difficult month from both the perspective of the global pandemic and the financial markets. At the time of our last writing, the pandemic was accelerating, but has now become a full-blown global healthcare crisis. In our commentary last month, we highlighted that we are looking for strong monetary policy from the Federal Reserve, strong fiscal policy from Congress and the White House, expanded testing for COVID-19 and a peaking of the COVID-19 cases to gain more confidence in a recovery.

Two of the four events required to gain more confidence have occurred. The Federal Reserve and Congress have taken unprecedented actions to ameliorate the economic damage occurring from stay-in-place orders across the country. The remaining two events are a work-in-progress. There has been significant progress in development of testing kits; however, national testing remains limited and needs to be significantly expanded before Americans become more confident in going back to work outside their homes. While there is early evidence that the number of COVID-19 cases is peaking, there is growing concern there may be a second wave of infections after our country attempts to reopen the economy. Therefore, while fiscal and monetary responses have been significant and should support the financial markets and economy for the next few months, a solution to the healthcare crisis remains elusive.

After market participants became highly focused on economic data leading into 2020, investors are now focused on the recommendations of Dr. Anthony Fauci, the Director of the National Institute of Allergy and Infectious Diseases (NIAID). The future reopening of the U.S. economy appears to lay in the hands of the scientists. Their research and counsel are of paramount importance. Long-term, the solution to this virus is a safe and effective vaccine, which may take 12-18 month to be developed. In the interim, treatment options are being evaluated to provide medicine for virus-stricken patients to nurse them back to health. In addition, active testing will be required to determine who can safely go back to work and who should stay home. When asked about the timeline for the country to be reopened, Dr. Fauci remarked “You don’t make the timeline. The virus makes the timeline”. Therein lies the challenge we are facing as a country, and globe, to “get back to normal.”

While there remains a significant amount of uncertainty regarding the outcome of this pandemic, we remind you: it is in these periods of greatest uncertainty when long-term investment opportunities are their best. This does not mean the stock market may not go lower from here. Volatility will likely remain until the global pandemic risks diminish. However, we continue to identify and invest in strategies favoring companies with strong balance sheets and business models we expect will emerge from this crisis with stronger competitive advantages. In addition, while it is difficult to look ahead, historically, markets have recovered from a variety of economic and stock market setbacks. While the origin of this setback is different, investors who have exercised patience to stick with a disciplined financial and investment plan in previous downturns have been rewarded. However, in the short-term, since economic and business trends are expected to get worse before they get better, maintaining adequate cash reserves for cash-flow needs is paramount to avoid raising cash at an inopportune time. With market conditions improving over the past three weeks, we are hopeful for visible progress on the healthcare front leading to a sustainable recovery in our economy. If you should have any questions about your investments, please call your financial advisor to discuss strategies to meet your needs. Stay healthy and safe!

Important Tax Planning and Preparation Updates

REQUIRED MINIMUM DISTRIBUTIONS ˜RMDS° SUSPENDED FOR 2020

As we noted in our recent CARES Act summary, required minimum distributions (RMDs) for 2020 have been suspended. This applies to Traditional IRAs, SEP IRAs, and SIMPLE IRAs, as well as 401(k), 403(b) and Governmental 457(b) plans. This benefit applies to both retirement account owners, themselves, as well as to beneficiaries of decedent IRAs.

The Act not only eliminates RMDs for 2020, but any RMD that otherwise needed to be taken in 2020. Thus, individuals who turned 70 ½ in 2019 but did not take their first RMD in 2019 and normally would have been required to take such a distribution by April 1, 2020 as well as a second RMD by the end of 2020, do not have to take either their 2019 RMD or their 2020 RMD. A double win for these folks assuming they don’t need the cash flow from these distributions.

Please keep in mind that the age for RMDs starting in 2020 is now 72, not 70 ½. This was a change under the SECURE Act passed in late 2019.

What happens if you already took your 2020 RMD and didn’t really need it? You may have the option to “return” it. For IRA, 401(k) and other retirement account owners there are two avenues to accomplish this for any distribution made beginning January 1, 2020:

  1. If the RMD distribution has occurred in the past 60 days and no other rollovers have been made within the past 365 days, the RMD distribution can simply be returned to the retirement account.
  2. If the 60-day rollover window has already expired, there is another provision under the CARES Act that may allow you an avenue to “return” it. If the account owner can show that they have been impacted by the COVID-19 crisis under the guidelines established in the legislation, then a rollover can be completed anytime for the next three years from the date the distribution was received.

PLEASE NOTE THAT IT APPEARS THAT THE 60 DAY ROLLOVER PERIOD HAS BEEN EXTENDED TO JULY 15TH FOR ANY DISTRIBUTION TAKEN FROM FEBRUARY 1 THROUGH MAY 15TH. THIS WILL PROVIDE FURTHER RELIEF FOR THOSE WANTING TO RETURN THEIR DISTRIBUTION.

Unfortunately, if you took an RMD as a beneficiary of an IRA, those are not eligible to be “returned” as they are not eligible for a rollover. The lone exception would be for a spouse who chose to remain a beneficiary of the deceased spouse’s retirement account. The spouse may be eligible to put the RMD back into their own retirement account as a spousal rollover.

If you are considering “returning” an RMD, we highly recommend you work with your financial advisor to accomplish this in order to insure it’s completed and coded correctly by the custodian and handled appropriately on your tax return.

TAX DEADLINE UPDATE

On April 9th, the IRS issued Notice 2020-23 which brought further relief to taxpayers by allowing all payments typically due from April 1st through July 15th to now be due July 15th. This notice clarified that Q2 estimated tax payments typically due June 15th are now also extended to July 15th along with the Q1 estimated tax payments. This applies to individuals, trusts, estates, and corporations. For individuals and corporations, this means that any remaining 2019 tax and any 2020 Q1 and Q2 estimates are all due July 15th.

Please note that this Notice applies only to federal tax payments. Individual states may or may not be following the IRS deadlines. Ohio is following the IRS deadlines. Kentucky has extended their 2019 tax returns and payments, as well as the Q1 estimates to July 15th, but they have not, as of yet, adjusted the Q2 estimated tax deadline of June 15th. Please consult with your tax or financial advisor if you file taxes in other states.

The CARES Act and the various tax deadline extensions can bring about many questions. We are here to assist you. Please do not hesitate to reach out with questions or to discuss your specific situation.