The 3 Most Significant Issues for Investors as We Begin 2020
By: Steven Higgins, Financial Advisor, Principal
After closing the books on 2019, we unwrap 2020. It seems like things are barreling forward so fast that it can be difficult to take stock of what just happened, much less look beyond the dashboard at what is to come. Here are the most significant issues affecting investors and our clients as we begin 2020.
#3 Interest Rates Re-Visit Record Lows
After steadily increasing in 2018, the yield on the 10 Year Treasury retested multigenerational lows setting a bottom of less than 1.5% in September. In the spring, some analysts pointed to certain inversions between benchmark rates, specifically that between the 2 and 10 year Treasuries as potential indications of a pending recession. Since then the inversions have appeared to be anomalistic and the yield curve has normalized. The bond portion of a diversified portfolio faired very well due to the increase in price of bonds caused by a drop in rates while the actual interest rates paid by bonds decreased.
Interest rates are still low. 2020 may be a good time for our clients to make sure they are in the best mortgage position possible. Maybe 2020 is the time to purchase a home, invest in an income producing property, or refinance a current loan. A significant component of the cost to purchase a property is the interest rate. While the last few years have made us familiar with mortgage rates near 4%, this is anything but normal and may just be a fleeting chance to secure some of the best financing in history.
#2 Legislative Changes Affect Retirement Savings for Many
While the Tax Cuts and Jobs Act was signed in 2017, Americans didn’t really feel the impact of the changes until they filed their taxes in 2018. The biggest changes for our clients came in the way of increased standard deductions and changes in the way we managed charitable contributions. Never before has the concept of strategic contribution strategies such as Donor Advised Funds been more relevant. Additionally, retirees have found opportunities to benefit from strategies such as ROTH conversions because of changes to the marginal tax rates.
As a surprise addition to year end budget negotiations, the Secure Act was passed changing the way many American’s save for retirement. Key changes affecting our clients are, the elimination of the “Stretch IRA”. Previously, beneficiaries of IRAs could stretch the required minimum distribution of their IRA over their own life span, now the IRA must be withdrawn in 10 years. Additionally, the new age that individuals must begin taking required minimum distributions is 72. Going forward, there is no longer a cap on the age at which an individual can make an IRA contribution.
#1 Staying the Course Remains as the Key Element of Success
The end of 2018 saw the bottom of the first 20% correction in the S&P 500 in a decade; fear seemed to pervade the headlines. Many novices as well as “Experts” foretold of the dire year to come. At HD Wealth Strategies we remained diligent and focused while having meaningful conversations with our clients about their personal goals. We hosted an office and virtual event called “Riding out the Storm” where we addressed the fear and and met our client’s concerns head on.
2019 turned out to yield the best total return by the S&P 500 in 20 years. While there was certainly volatility along the way, which is normal, stocks rallied through global trade uncertainly and intense political fighting in Washington. Truly, 2019 was an incredible example of why having a plan and sticking to the plan is truly the best strategy.
2020 will certainly bring with it volatility and cringe worthy moments. The year begins with the President’s impeachment trial in the Senate and the year ends with the presidential election. There will be no shortage of political fodder. While the economy remains incredibly strong and has proven to be very resilient, there will be short term setbacks. During any correction there are certain to be those, “experts” and otherwise once again foretelling certain doom. Remember having a plan and sticking to the plan is the best strategy.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through HD Wealth Strategies, a registered investment advisor and separate entity from LPL Financial. The opinions voiced in this material are for general information only and are 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 directlyThe economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. .
