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February 27, 2020

Market Update

Wow! What a week we are having in the stock market.

The price of the benchmark S&P 500 has dropped some 340 points (as of this writing) since closing at an all-time high (3,380.16) on 2/19/2020, with most of the action occurring this week.  The headlines are reading that the market is entering “Correction” territory, as defined by a 10% or more drop from the benchmark’s high.  Most fingers are pointing to the expanding outbreak of the Coronavirus and its potential global economic impact as the primary culprit for the selloff. My objective in sharing this brief commentary is twofold: 1. To offer a bit of perspective to keep the current market move in its appropriate context and 2. To remind you just how well prepared you are for this type of a market environment.

Perspective is found by widening the viewpoint and looking at the current situation from a couple of different directions.  One alternative view is to reflect on the recent past, where the same S&P 500 Index gained over 31% in 2019.  Yes, you read that correctly; US stocks gained over 30% last year alone.  So far this year, we are down approximately 5%.  The cumulative return of the S&P 500 since March 2009 is over 330%, despite the recent selloff. With dividends reinvested S&P 500 Index’s “total return” is over 430%.  We hope this helps put the recent drop (+/- 10% from the high) into a more balanced context.

Financial Coach Chief Investment Officer (CIO) Mike Traynor mused this morning that “market gains are invisible while the losses are acute”.  This is an old story, but we believe it’s worth retelling. The joy we feel when the market goes up pales in comparison to the pain we feel when it goes down.  The above referenced stats are indicative of this phenomenon, and Traynor went on to share that “progress is slow, steady, and silent while setbacks are loud, noisy, and scary”. 

“Market gains are invisible while the losses are acute.”

Mike Traynor CFA®, Financial Coach Chief Investment Officer

It is certainly “loud” right now, and you have every right to be nervous, anxious, and wondering “what’s next”?  We do not know what’s next, but we do know that Financial Coach clients are as well prepared for this market environment as anyone out there.  Why do we have this confidence, you ask?

1. We have been encouraging every client to maintain a sizeable allocation of cash in their portfolio and to use their recent market successes to bolster their “Store”, just in case we ran into this type of market scenario.

2. We “balanced” the stock allocation in most client portfolios with bonds, which over the last week have gone up, offering important “ballast” to the diversified portfolios you hold with our firm.

3. Don’t forget the “Core”.  Many of our clients also have bucket #3 where a conservative and sometimes guaranteed strategy is being employed to manage volatility and offer another option for cash-flow when necessary.

“Don’t be surprised, be prepared.”

The Team at Financial Coach

One of our favorite sayings here at Financial Coach is, “don’t be surprised, be prepared”.  You are prepared, and with the continued support of your trusted advisors and friends here at Financial Coach, you will handle this and future market storms with poise and composure.  If you are feeling a bit uneasy, just need a pep talk, or possibly a more formal planning discussion, do not hesitate to call or email us.  We are here to serve you and are excited to work with you through this very interesting time.


Owen Mulhern IV, CFP®
President, Financial Coach

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January 7, 2020

How does the SECURE Act affect you?

On December 20, 2019, President Trump signed the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). This SECURE Act does several things to modify both retirement savings rules as well as retirement distribution rules.

These changes will affect some of our Financial Coach clients immediately, and many more as we move into the new decade. Below is our effort to provide a layman’s terms and concise outline of some of the key provisions affecting clients:

1. Require Minimum Distributions (RMDs) from 401(k) plans and Traditional IRAs have historically started in the year the account owner turns age 70 1/2 years. The SECURE Act pushes that to age 72, creating approximately one and a half years of continued tax deferred growth of retirement savings before being required to tap into them. This new age rule only applies to those account owners who did NOT yet attain the age of 70-and-1/2 by the end of 2019.

2. No longer any age restrictions on contributions to Traditional IRAs; savers can now continue to put money away into a Traditional IRA after 70 1/2 years of age. The caveat for both Traditional IRA and Roth IRA contributions (there are no age restrictions on Roth IRA contributions) is that the saver must have “earned income” to make a contribution. Retirement Account distributions, Social Security income, and Pension income do not count as earned income for these [Traditional IRA contribution] purposes.

3. “Stretch” IRAs Eliminated. Traditionally, non-spouse IRA beneficiaries were allowed to take distributions from the Inherited IRA based upon the inheriting person’s life expectancy, effectively allowing the heir to stretch the distributions, and in turn the IRA account, for a long period of time. Now, under the new SECURE Act, all funds from an Inherited IRA must be distributed to non-spouse beneficiaries within 10 years of the owner’s death.

Notable Exceptions:

[i] If the beneficiary of the IRA is the account owner’s spouse, the RMDs are still delayed until the end of the year which the deceased IRA owner would have reached age 72 years.

[ii] Distributions over the life expectancy of a non-spouse beneficiary are allowed if the beneficiary is either a minor, chronically ill, disabled, or not more than 10-years in age younger than the deceased IRA owner. For minors, the exception only applies until the child reaches the age of majority, at which point the 10-year rule begins taking affect.

It is important to note that existing Inherited IRAs are grandfathered under the previous rules, so beneficiaries of these accounts will still be allowed to spend them down over their lifetime. However, if those beneficiaries die before the complete distribution of the account, the subsequent beneficiaries will be subject to the 10-year limitation.

Several provisions regarding retirement accounts and 401(k) accounts are beyond the scope of this outline. Please see the references below for more information and details regarding the SECURE Act.


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May 28, 2019

The Eternal Optimist

Positive Vibrations to Brighten Your Day

By @JeffMastronardo

I stumbled upon some interesting information the other day that I thought timely to share with you.  If you go online or turn on your TV, there is no doubt it will be easier to find headlines or articles about how bad the economy is or how bad it is going to get.  Below I have listed some stats that if you didn’t know, you should, and hopefully they can brighten up your day a little bit.

  • For the first time ever, there are more job openings posted in America than there are people looking for work.
  • Initial claims for unemployment in March 2019 dropped below 200,000 for the first time since men walked on the moon.  Relative to population (329 million at year-end 2018 vs. 203 million in July 1969) this is by far the lowest number ever recorded.
  • Household net worth is well over $100 trillion, yet household leverage – debt payments to disposable income – is lower than it’s been since 1980.
  • In 2018 the United States became once again the largest oil-producing country in the world.  In 2020 we will become a net exporter of hydrocarbon energy.
  • The iPhone in a middle school child’s backpack contains, by orders of magnitude, more computing power than NASA command on the day Neil Armstrong stepped onto the moon.
  • The US is minting 1,700 new financial millionaires, excluding their homes, each day.
  • In November of 1960 over half the world’s population lived in extreme poverty, the majority of humans were illiterate.  The percentages today are barely 10 and 15 respectively.
  • In the next 24 hours, assuming this is an average day on Planet Earth, 217,000 people will have escaped extreme poverty, 325,000 will have gained some access to electricity, 300,000 more will have gained access to clean water and 600,000 will have gotten online for the first time.

The world isn’t perfect, and not everyone is living the American dream.  I merely wanted to highlight for you the amazing progress we have made and remind you that the news isn’t all bad.

The eternal optimist,

Jeff Mastronardo

Financial Coach


Data quoted in the above bullet points are excerpts taken from an interactive newsletter by Nick Murray [Longevity The New Inequality, Nick Murray Interactive Volume 19 Issue 5, accessed May 2019], which includes reference to the following as sources for this data.

  • Ryan Krueger of Krueger & Catalano 2017, Two’s Are Now Underestimated: The Mikan Drill for Stocks, Sure Dividend, <www.suredividend.com/mikan-drill-for-stocks>
  • Jeffrey A. Tucker 2019, Wealth Has Never Been More Equal, American Institute for Economic Research, <www.aier.org/article/wealth-has-never-been-more-equal>
  • Tracey Longo 2019, DALBAR: U.S. Investors Lost Twice As Much As The S&P In 2018, Financial Advisor Magazine, <www.fa-mag.com/news/u-s–investors-lost-twice-as-much-as-the-s-p-500-in-2018-43995.html>
  • Kenneth Rogoff 2019, Modern Monetary Nonsense, Project Syndicate, <www.project-syndicate.org/commentary/federal-reserve-modern-monetary-theory-dangers-by-kenneth-rogoff-2019-03>
  • Mark J. Perry 2019, Dynamic chart of the day: The evolving electricity mix of the US, 1985-2017, Carpe Diem AEI, <www.aei.org/publication/dynamic-chart-of-the-day-the-evolving-electricity-mix-of-the-us-1985-2017/>
  • Marian L. Tupy 2019, Food Prices in 1919 Compared to Today, FEE, <www.fee.org/articles/food-prices-in-1919-compared-to-today/>