Despite the concerns about strained relations with China, increased COVID infections, social protests, weaker earnings, high U.S. unemployment and the November election, the S&P 500 Index is up 1% for the year while the Nasdaq Index is up 19.7%. The increasing spread of the virus is suppressing a healthy economic recovery as consumers and businesses remain conservative in their spending.
I normally do not make a practice of working from home, but with safe distancing and travel limitations sparked by the pandemic, staying home was something many were following.
After setting up my home office and starting some projects, I reached for my yellow highlighter, then laughed because I didn’t have one at home, then resorted to using Post-it Notes.
I realized just how often I used my yellow highlighter at work and decided to pick one up the next time I went to the office. I find it handy to use a highlighter, which has become part of my work process. I’m sure many of you feel similarly.
With that being said, I do want to issue a warning about highlighters, be they yellow, pink, or blue: Never use them on your original estate-planning documents. The same goes for using Post-it Notes or worse yet, crossing out text and handwriting changes in the margins. These attempts at changes could possibly create unforeseen issues.
Florida law is quite clear on how to make changes to estate-planning documents such as your will or trust. For example, in order for a codicil to a will or an amendment to a trust to be considered valid, it must be signed by you (the testator/grantor) and witnessed by two people in the presence of all parties (the testator/grantor and the witnesses).
This is why we encourage our clients to talk out the changes with us and seek your estate planning attorney’s help to finalize them. In this case, you could use your highlighter or marker to create a “working document” that you can take to your attorney and discuss, then create a new, unblemished document and shred the old one with your notes.
Why? Here is an example of what could happen: If these handwritten changes were discovered and never formally executed, the parties in your trust document could hire attorneys to determine whether these changes impact the original document, therefore costing your estate financially.
Play it safe. If you are interested in making changes, contact your trust officer for a review and set up an appointment to meet with your attorney and obtain the necessary codicil or amendment. Your successor trustee will thank you and your new wishes will happen as you intended.
These suggestions are something for you to consider, and if you have a yellow highlighter, remember it’s great for notes, but not for wills and trusts.
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The arrival of hurricane season in the midst of the COVID-19 pandemic requires us all to be doubly vigilant. You’ll be hearing a lot about hurricane preparedness when it comes to protecting yourself and your loved ones in terms of shelter, safety and supplies. Researchers are predicting 19 named storms this year, and FEMA (Federal Emergency Management Agency) has posted some important operational guidelines on its website (fema.gov).
The S&P 500 Index has rebounded 35% from the low on March 23 and is now only down 6% year-to-date. The rally was slow and deliberate as the headlines shifted from a virus-induced economic lockdown to a gradual re-opening. The economic re-start will revitalize small and large business activity and inspire consumers to emerge from their shelter-in-place. The support of the Federal Government’s CARES Act and the Federal Reserve’s active management of the low interest rate and liquidity environment will dramatically help the recovery. Unless the virus infection curve rises again, the second quarter GDP will mark the trough of U.S. economic activity so future quarters should demonstrate accelerating economic growth. Optimism is supporting higher valuations with development news of many potential vaccines and the declining virus infection curve. The U.S. population is adapting to the new virus-preventative measures with new policies and procedures which will balance safety and growth for the future.
Several market technicians and strategists are warning that the leadership in this market has been mostly among the large cap technology companies. The five largest companies in S&P 500 Index (Microsoft, Apple Google, Amazon and Facebook) represent 21% of the weighting in the index. These strong growth companies continue to innovate and focus their digital strategies on cloud storage, social media, digital shopping, enhanced intelligence and virtual reality. The sector performance leadership has been remarkably narrow with information technology up 17%, healthcare up 10% and consumer discretionary up 8% while the remaining sectors are negative. The energy, financial and basic material sectors are down the most while the small cap index is down 16% and the mid-cap index is down 14% year-to-date. There should be a broadening market rally that will fuel these sectors to catch up over the summer months.
The international markets are also experiencing great volatility and some optimism recently. The European Union is trying to negotiate a stimulus package that relies on the more productive northern countries to provide debt relief and stimulus to the southern countries. The EU is expected to have 8-12% economic contraction this year and requires government intervention, but skeptical resistance by northern countries will prove hard to overcome. Russian GDP, with its heavy dependence on oil prices, is contracting dramatically which provides less social and political stability. China remains in political and economic disfavor after pandemic mismanagement and recent actions in Hong Kong. We should expect China’s government to be the political punching bag in the U.S. elections in November which will deter acceleration in trade. Due to these uncertainties we remain underweighted in all international markets.
Investors reconsidered the emotionally-oversold market in the month of April and bravely pushed the market higher by 12.7% even before news about the virus infection curve flattening. Since the “shelter-at-home” policies have reduced the infection rate, government policymakers are announcing dates for re-opening the economy. After an economic full-stop and 26 million Americans losing jobs, an economic restart will be a slow process. By staging a deliberately slow ramp-up in economic activity, the government hopes to prevent the healthcare system from being overwhelmed. While Wall Street and the markets are anticipating a “V-shaped” economic recovery, Main Street may experience more of a Nike “swoosh-shaped” recovery.
Criminals often take advantage of uncertain times, leading to an increase in fraudulent activity. Please remember, we will never call you to ask you to provide or verify your full account number, username, password, debit card number, unique PIN or Social Security number. If you receive a call from someone requesting this information, even if the caller ID looks like it is coming from the bank, immediately hang up and report it to Englewood Bank & Trust Customer Service at 941-475-6771. Representative are available Monday-Friday: 8:00 a.m. - 5:00 p.m.
I wanted to write a note to you about the tremendous first quarter market volatility and the 20% S&P 500 Index decline. This “waterfall” decline was the worst since the 2008 Great Recession and was particularly unusual since the market was trading at an all-time high on Feb. 19. The COVID-19 pandemic is an unprecedented event elevating fear and uncertainty, but it is a transitory event for the markets and the U.S. economy. Meanwhile, we hope you please practice social distancing and stay safe.