Be on the Alert for Coronavirus Scams

The FTC (Federal Trade Commission) has received over 20,000 COVID-19 related complaints since January 1, 2020.

Fraudsters and scam artists are always looking for new ways to prey on consumers. Now they are using the same tactics to take advantage of consumers' heightened financial and health concerns over the coronavirus pandemic. Federal, state, and local law enforcement have begun issuing warnings on the surge of coronavirus scams and how consumers can protect themselves. Here are some of the more prevalent coronavirus scams that consumers need to watch out for.

Schemes related to economic impact payments

The IRS recently issued a warning about various schemes related to economic impact payments that are being sent to taxpayers under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.¹ The IRS warns taxpayers to be aware of scammers who:

• Use words such as "stimulus check" or "stimulus payment" instead of the official term, "economic impact payment"
• Ask you to "sign up" for your economic impact payment check
• Contact you by phone, email, text or social media for verification of personal and/or banking information to receive or speed up your economic impact payment

In most cases, the IRS will deposit the economic impact payment directly into an account that taxpayers previously provided on their tax returns. If taxpayers have previously filed their taxes but not provided direct-deposit information to the IRS, they will be able to provide their banking information online at irs.gov/coronavirus. If the IRS does not have a taxpayer's direct-deposit information, a check will be mailed to the taxpayer's address on file with the IRS. In addition, the IRS is reminding Social Security recipients who normally don't file taxes that no additional action or information is needed on their part to receive the $1,200 economic payment — it will be sent to them automatically.

Fraudulent treatments, vaccinations, and home test kits

The Federal Trade Commission is tracking scam artists who are attempting to sell fraudulent products that claim to treat, prevent, or diagnose COVID-19. Currently, the U.S. Food and Drug Administration (FDA) has not approved any products designed specifically to treat or prevent COVID-19.

The FDA had warned consumers in March to be wary of companies selling unauthorized coronavirus home testing kits. On April 21, 2020, the FDA authorized the first coronavirus test kit for home use. According to the FDA, the test kits will be available to consumers in most states, with a doctor's order, in the coming weeks. You can visit fda.gov for more information.

Phishing scams

Scammers have begun using phishing scams related to the coronavirus pandemic in order to obtain personal and financial information. Phishing scams usually involve unsolicited phone calls, emails, text messages, or fake websites that pose as legitimate organizations and try to convince you to provide personal or financial information. Once scam artists obtain this information, they use it to commit identity or financial theft. Be wary of anyone claiming to be from an official organization, such as the Centers for Disease Control and Prevention or the World Health Organization, or nongovernment websites with domain names that include the words "coronavirus" or "COVID-19," as they are likely to be malicious.

Charity fraud

Many charitable organizations are dedicated to helping those affected by COVID-19. Scammers often pose as legitimate charitable organizations in order to solicit donations from unsuspecting donors. Be wary of charities with names that are similar to more familiar or nationally known organizations. Before donating to a charity, make sure that it is legitimate and never donate cash, gift cards, or funds by wire transfer. The IRS website has a tool to assist you in checking out the status of a charitable organization at irs.gov/charities-and-nonprofits.

Protecting yourself from scams

Fortunately, there are some things you can do to protect yourself from scams, including those related to the coronavirus pandemic:

• Don't click on suspicious or unfamiliar links in emails, text messages, and instant messaging services.
• Don't answer a phone call if you don't recognize the phone number — instead, let it go to voicemail and check later to verify the caller.
• Never download email attachments unless you can verify that the sender is legitimate.
• Keep device and security software up-to-date, maintain strong passwords, and use multi-factor authentication.
• Never share personal or financial information via email, text message, or over the phone.
• If you see a scam related to the coronavirus, be sure to report it to the FTC at ftc.gov/complaint.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.

¹Internal Revenue Service, IR-2020-64, April 2, 2020

Who CARES about the latest Act? You should!

Last Friday, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. It is a MASSIVE bill, ($2 Trillion+) causing president Trump to remark that he had never signed anything with a “T” on it before.

What the heck? A trillion here, a trillion there--soon we're talking about real money. I remember the days when we were tossing around billions as if it was real money. Those were the days!

The bill contains many stimulus measures and tax benefits for families, workers, small businesses and governmental agencies. In this post, I will highlight and briefly explain some of the benefits, with the understanding that I too am learning as I write, and much more guidance on certain provisions is sorely needed and likely will be forthcoming.

Direct Payments to Individuals

The most notable provision in the bill is the direct payments to taxpayers. Specifically, individuals who had up to $75,000 in adjusted gross income or AGI (essentially any gross taxable income for most people) in 2019 will receive a one-time payment of $1,200, while married couples with AGI up to $150,000 will get $2,400. Additionally, taxpayers will receive an additional $500 for each qualified child, while individuals and families with income above their respective thresholds will see their relief payments reduced by $50 for every $1,000 in AGI.

Notably, while individuals must have a work-eligible Social Security number (and not be claimed as a dependent), they don't need to have had reportable income in 2019 and can be eligible for other income-benefit programs as well.

If you have not yet filed your 2019 return (which is now due on July 15, 2020), the IRS will estimate your payment based on your 2018 return. If the IRS has your banking information from your tax return, your payment will be directly deposited into the same account used for your tax refunds or payments. Otherwise, they'll mail you a check. If you're not required to file a return due to your income, the IRS may still find you to send you your payment, but forthcoming guidance on how to get your payment will help those not required to file a tax return.

Keep in mind that this payment is an advance on this year's (2020) tax credit, so you'll have to "true-up" this payment with your overall 2020 taxable income (and potentially receive a higher or lower credit amount). Tax planning, to reduce your overall AGI, becomes essential. For example, increasing deductible IRA or 401(k) contributions can help if you're anywhere near the phaseout limits.

Retirement Distribution Provisions

From a retirement planning perspective, notable provisions of the CARES Act include the elimination of the 10% early withdrawal penalty on distributions from retirement accounts for so-called “Coronavirus-Related Distributions” (with the option to spread income taxation over three years, and the ability to re-contribute back to those same accounts to make up in the future). The Act also suspends the required minimum distributions (RMDs) in 2020 for a wide variety of retirement accounts (for both account owners as well as beneficiaries), as well as the ability to return current year already-made distributions to your retirement plan.

401(k) loan maximums are expanded from $50K to $100K. Obviously, I highly recommend against taking 401(k) loans or pre-retirement distributions unless you have no reasonable alternative. Remember, while the 10% penalty for early distribution is waived, you still have to pay taxes on the taxable portion of the distribution.

Unemployment Benefits Expansion

In addition to the above cash payment, unemployment benefits became much more generous. While what you get in unemployment benefits vary by state, for at least the next four months, the benefit will go up by $600 a week, and more people will qualify for unemployment benefits for a longer period of time (13 weeks longer).

There is also an expansion of benefits for those who would otherwise not normally qualify (like self-employed individuals and independent contractors). Here the rules can get a bit complicated, and more guidance for self-employed individuals is definitely needed.

Normally, the self-employed don’t qualify for unemployment benefits. However, the legislation starts a new program called the Pandemic Unemployment Assistance Program. You’ll get the $600 per week, plus half the average unemployment benefit in your state. So if you’re an independent contractor out of work, you may be in luck! Remember though that all unemployment benefits are taxable income. 

College Student Provisions

The Act provides for the deferral of Federal student loan payments (principal and interest waived) through September 30, 2020. This deferral is not necessarily automatic--you should contact your loan servicer to make arrangements for deferral. If you were thinking about converting/refinancing from federal student loans to private loans, you will probably want to hold off a few months or discuss this with your financial advisor. Those of you on track for Public Service Loan Forgiveness (mostly physicians) basically get six free payments toward your 120 qualifying payments.

Other student benefits including work-study payments are now just grants (possibly non-taxable). Undergraduates who dropped out of school due to the pandemic won’t lose eligibility time for Pell Grants or subsidized loans. Arts programs, universities, and other institutions of higher learning are also getting their share of stimulus payments.

Small Business Provisions

With respect to small businesses that have been impacted by COVID-19, certain small businesses with up to 500 employees will be able to take out loans (up to $10M depending on payroll costs and other factors-see next paragraph), which will be eligible for forgiveness if used to cover payroll and other expenses (like rent and utilities), along with other ‘employee retention’ tax credit opportunities. Other benefits for businesses include a delay in the employer’s portion of Social Security payroll tax until January 1, 2021 (with half of the deferred amounts due at the end of 2021, and the other half due at the end of 2022), and more flexible Net Operating Loss rules to obtain immediate refunds, among other provisions.

As part of the benefits to small businesses, there is $10 billion set aside for “emergency grants” to cover immediate operating costs, up to $10,000 per business. However, to get it, you have to apply for a Small Business Administration (SBA) Economic Injury Disaster Loan. Each small business can borrow 2.5X average monthly payroll expenses over the last year up to $10 million, at an interest rate no higher than 4%, without any personal collateral or guarantee. Fees, principal, and interest is expected to be deferred for 6-12 months.  The amount of that loan that is used for payroll, rent, utilities, and loan interest (including mortgage) for the first 8 weeks could be forgiven tax-free, provided workers stay employed through the end of June. This is more generous than anything I've ever seen, at least in my lifetime.

There is another $17 billion set aside to cover payments on previously existing SBA loans. Also, there is currently a limitation on how much interest a business can deduct. The CARES Act raises it to 50% from 30%. Net operating losses from 2018-2020 can also be carried back five years, allowing you to refile your taxes for those years immediately to get a refund.

Other Miscellaneous Provisions

The legislation does a few other things, such as delaying your tax return and tax payment due date for 2019 income tax returns to July 15, 2020. First-quarter 2020 estimated income tax payments are also due July 15th, but oddly,  second-quarter 2020 estimated tax payments are still due on June 15 2020. I suspect that will be corrected in a technical corrections bill. Many states are also going to be pushing their tax due dates to coordinate with the new federal deadlines. This is changing rapidly, so check with your own state taxing authorities.

To help you support your favorite charity, you now have a new tax benefit too. If you don’t itemize your deductions, you can take up to $300 in charitable donations as an above-the-line deduction. The limitation on how much of your income that you can deduct (normally 50%) is eliminated as well, but just for 2020 (I personally don't know anyone who gives away 50% of their income to charity, let alone more, but for this year, you can!)

If you're one of the brave (or one who has no choice), the Act waives airplane ticket excise taxes for any trips taken during the rest of 2020.

The bill spans 247 pages, so I can't possibly detail all of the provisions. Therefore, I've only provided the highlights that I thought were most relevant for my readers (I admit that I have not read all 247 pages). Some of the provisions will require a bit of planning by individuals and small businesses, and on that, I will detail in future posts. And it's very possible or likely that more stimulus is coming, depending on how long the effect of COVID-19 lasts, so I don't believe that this is the last we've heard on this topic.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.

Source: Kitces.com

What's Going on in the Markets March 28, 2020

The unprecedented market volatility continued as Friday's downside action capped off an otherwise strong week. A robust three-day bounce of about 20% from Monday's lows saw us give back roughly 1/4 of the weekly gains on Friday.

Still, in all, it was a great week for the bulls. The stock market, as measured by the S&P 500 index, gained about 10.25%, reclaiming about 1/3rd of the bear market losses incurred over the prior four weeks. This doesn't mean, however, that the bulls are out of the woods and ready to run free in the fields. Bear markets rarely end after only five weeks, especially when volatility remains as high as it currently is.

So far what we've witnessed this week seems to be classic bear market action. Whenever the markets get so far stretched to the downside, just like a rubber band, some sort of snap-back action is to be expected. Indeed, as I've described in previous postings, a "wicked rip your face off rally of 20-50%" was to be expected. So yes, we could get more upside in the short term.

What we have experienced in the markets over the past five weeks is a "waterfall" decline followed by a robust bounce that gets many investors to think that the worst may be over. Most of the time, after convincing many that it's safe to jump back in, we get a reversal of the bounce. If, in turn, the reversal plays out in traditional fashion, then the lows that were hit this past Monday will eventually be revisited and tested to see if they'll hold.

If the lows don't hold, then anyone buying into the bounce will be holding "losers" and will likely join the selling with anything they bought into the bounce and then some. If the lows do hold, then we will likely see a more durable (lasting) rally which may confirm that the worst of the decline is over for the intermediate-term. That may be the "safer" time to make more meaningful additions to your portfolio (but check with your investment advisor or talk to us).

The optimists are hoping that the massive fiscal and monetary stimulus will backstop stocks and prevent that retest from occurring, or that Monday's lows will hold. The pessimists are concerned that the uncertainty of the coronavirus and its economic consequences will keep buyers on the sidelines, and that more sellers will emerge.

The response of both the Federal Reserve and the federal government has been unprecedented. The Federal Reserve outright stated this week that it’s willing to provide unlimited monetary stimulus, announcing program after program, as its balance sheet exceeds $5 trillion for the first time. That's $5 trillion with a "T".  Yes, $5,000,000,000,000. Pause for a moment and let that number sink in. I'll wait.

Similarly, the $2 trillion stimulus package passed by Congress and signed by the President on Friday is more than double the $800 billion package passed in 2009 to ease the Great Recession. These efforts will dampen the economic fallout that has already begun to take place, but the full impact that will be realized is still largely unknown. I believe that more stimulus is going to be necessary.

The somewhat expected explosion in jobless claims on Thursday to a record 3.3 million (it had been averaging about 220,000-230,000 for many weeks) coupled with Friday's sharp drop in reported Consumer Sentiment (no surprise given what's going on in the world) indicates that the ongoing economic damage will likely be significant.

While Monday may possibly have marked an intermediate-term bottom in the market, it remains to be seen if the risks which were identified in prior posts (e.g., stock market and real estate overvaluation, low-quality corporate debt levels at a record high, yield curve inversion) will be unwound or not. The excesses that have been built up over the course of this economic cycle in terms of stock market overvaluations, inflated housing prices, and low-quality corporate debt remain in place for the most part and are clearly risks going forward. The depth and duration of this recession will be determined primarily by what happens in these key areas of vulnerability.

As we navigate through this extreme volatility, we will depend on key technical indicators to confirm whether or not Monday’s low was the bottom. Because I have serious doubts that this is the case, we used the bounce this week to reduce our overall investment allocations to stocks and exposure to riskier corporate bonds for clients. The next several weeks should provide valuable insight into whether breadth (the number of stocks going up versus the number of stocks going down) and leadership are truly stabilizing, and just how much of the economic risk is actually behind us.

While we are seeing unprecedented government support, we are also experiencing an unprecedented event that will have ramifications for every single person in the world. It would be quite foolish to believe that this monumental event can be priced into the market very quickly or easily.

At some point, there will be exceptional opportunities and they will be even better if we remain patient and wait for sustained positive price action to develop. While this extreme volatility may be good market action for very short-term stock market traders, if you're looking to build longer-term positions, it is still too early to put any substantial capital at risk.

Nibbling a little on stocks "here and there" is OK, but I recommend that you never buy a full position at once. Always ask yourself if you're comfortable holding the position and adding to it if it went down by another 25-40%. If you're not comfortable doing that, then it's too soon for you to buy because you'll likely sell at the worst possible time.

Enjoy the weekend and please stay safe. I am here to answer any questions you might have.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.

What's Going on in the Markets March 23, 2020

As if we didn’t have enough adjectives to describe the week before last's market action (unprecedented, brutal, relentless), there must be no more words to describe the terrible equity markets again last week, as a massive 4000-point drop in the Dow Jones Industrial Average (DJIA) was second to only one other over the last nine decades.

The other indexes (S&P 500, NASDAQ, Russell 2000) didn't fare much better either, as the losses posted by the average stock and every market gauge over the last month have been staggering. I'm not going to sugar-coat it: this has been one ugly market.

Indeed, we are now in Bear Market #26 over the last 90+ years, and though the speed of this sell-off has been unparalleled, the magnitude of the decline (at least for the S&P 500 index) at present is a bit less than average. Unfortunately, that doesn't mean it can't get worse, but it also doesn't mean it can't get better.

Over the past year, as I met with clients for our annual reviews, I sheepishly explained the large cash positions and growing hedges (options sold against the portfolio and bear market funds), why I and other portfolio managers felt that there were very few good values in the market and that we were under-invested for good reasons. Heck, even the most seasoned of portfolio managers weren't buying the best value stocks out there, and growth stocks trounced the returns on value stocks for years. Stocks like Microsoft, Apple, Facebook, Tesla, Google, Amazon, Netflix all marched higher on a seemingly daily basis, while great blue-chip value stocks like Haliburton, Schlumberger, CVS, and IBM languished in the bargain bin.

As I met with prospects over the past year, I know that I lost the business of at least two of them that had 90%+ exposure to the stock market. When I was asked what my plan would be for their portfolios, I explained that their portfolio risk far outweighed their personal risk tolerance and that I would immediately and significantly lighten up on stocks and stock funds. Needless to say, when I heard back from them, they said my approach was too conservative and decided to "go in a different direction". I can only hope that they heeded my warning.

Day after day, week after week, month after month (after the December 2018 low), the markets would question my defensive stance, and no doubt quite a few clients were unhappy being under-invested and not making as much money as the markets were. Every market pullback from a new record high was aggressively bought up, and we had no choice but to nibble here and there, knowing that we might have to stay close to the exits on those purchases. I've been doing this a long time, and as I've said before, I've not witnessed such persistent selling without a robust bounce ever in my career, making unscathed exits nearly impossible.

What's Next?

That's enough about what's happened. Most are interested in what's ahead. More pain or gain?

Unfortunately, the market loathes uncertainty, and with the COVID-19 shutdown of most swaths of the nation's economy, uncertainty is what we have in droves. Stocks trade on corporate earnings forecasts, and to-date, most companies have withdrawn their forecasts because of so many unknowns.

The stock market is what's known in portfolio management vernacular as "a forward-looking discounting mechanism", where the crowd sniffs out what's to come 6-12 months in the future. Everything you know as fact today is already factored into the market, or so goes what's known as "Modern Portfolio Theory". When the markets are rising, they're looking ahead 6-12 months out and forecasting what's to come, and they must be positive on the intermediate-term future. The opposite is true as well.

What we're witnessing in the daily "thrashings" up and down in the stock markets is the manifestation of the uncertainty as everyone tries to price stocks for "what's next". My best guess is that we're still in for a rocky bottoming period with new lowers lows likely ahead.

But it's not all gloomy. While last week's markets closed on the lows, we did see some "green shoots" to indicate that the volume of selling was waning, and there was some risk appetite returning to the markets. The small-capitalization stocks, often the riskiest of stocks, outperformed their "peers" on Friday. The volatility index did not make a new high on Friday. The number of stocks hitting their 52-week lows did not expand into the end of the week. And the number of stocks going up versus those going down got better (it's called breadth in this business).

When Should We Buy?

I'm heartened and encouraged that, among the calls and e-mails that I received last week, the preponderance of them were asking, "when should we buy?" It’s the right question now, as we continue to navigate this volatile bear market, of when it will be safe to start buying.  In that regard, history can provide valuable guidance.

The 1987 bear market is one historical precedent that is perhaps most like today's. Major indexes came off an equally frothy rally (as we've seen since December 2018) with the S&P 500 showing a strong year-to-date gain leading up to the August 25, 1987 peak. The bear market unfolded quickly after the top, losing 20% in just 38 days (this one in 2020 took 19 trading days). The bear market bottomed in December 1987 as selling pressure abated significantly and buying pressure took over. That led to one of the longest-running bull markets in history.

The Financial Crisis from 2007 to 2009 was a more protracted downturn that lasted 18 months. The lessons from that bear market include the observation that there are often enticing rallies on the way down which are called "bull traps", such as the rebounds in March and July of 2008. Don't get sucked into them.

As market losses deepen, it’s crucial to remember that headlines are the gloomiest near the market bottom, so paying attention to the media in March 2009 would have kept you out of the market for months, and you would have missed out on a 50% rally within just a few months. This time it's no different -- the fear mongers are out in full force with their 50% negative growth forecasts and S&P 500 index going to 1100 (down 75%) prognostications.

Stock market leadership is one of the most reliable indicators that a bear market bottom is in place. As a new bull market emerged in 2009, abating selling pressure and emerging buying pressure again provided the timeliest signal to start buying. Our client portfolios back then were defensively allocated with an invested position of about 50% (of maximum risk) at the March 9 bottom. As the selling abated and buying pressure ramped up, we quickly stepped up to 77% and then moved to 97% invested in June 2009 as other proprietary indicators confirmed the buying opportunity of a lifetime.

The important lesson is: Don’t try to second guess the bottom and don’t try to anticipate it. With no evidence of selling pressure abating and buying pressure pretty much absent currently,  I will let the weight of evidence tell me when the time is right to start increasing our invested allocation. Now is not that time; it's far too soon to buy in my opinion (and that could change, tomorrow, next week or the week after).

Today, unfortunately, every indication is that this bear market probably has further to run as the economy comes under increasing pressure. As I wait for the evidence to drop into place, our high cash and hedged positions are now two of the most valuable assets in our portfolio as we approach that future buying opportunity, probably the best one we've seen in over ten years. Meanwhile, try not to get sucked into bear market rallies-use them to lighten up on positions if you're overallocated to the stock market.

Never lose sight of the Warren Buffet quotation, “Unless you can watch your stock decline by 50 percent without becoming panic-stricken, you should not be in the stock market,” and we know that bear markets are not an unusual part of the investment process. It's the price we pay for superior returns over the long term.

Of course, legendary investor Peter Lynch said it best: "The real key to making money in stocks is not to get scared out of them." I'll add, as I paraphrase well-known TV host Jim Cramer, no one ever made money in the markets by panicking.

Please be safe and stay healthy during this difficult period of time in our lives. Don't hesitate to contact me if you have any questions or if I can be of any help.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.

Source: Investech Research

What's Going on in the Markets March 19, 2020

What a day. What a week. What a month.

The S&P 500 index lost another 5.2% yesterday - which is somewhat of a relief because it was down over 9% at one point during the day. The index did manage to close above Tuesday's low. That is potentially bullish. It's somewhat funny to say, but the NASDAQ 100 (QQQ) was the best performing of the major indexes, losing just over 3%. As daily swings of 3-5% become the norm, we become somewhat numb to them. Not fun.

Although there was no direct catalyst for the sell-off Wednesday, stocks erased nearly all of Tuesday’s big gains. Energy was massacred by another big drop in crude oil prices following reports that Saudi Arabia has said it will continue record-high oil production "over the coming months," accelerating its price war with Russia. Oil prices have been sinking as the Covid-19 pandemic reduced demand, and Russia in recent weeks failed to agree to an OPEC proposal to reduce oil production. West Texas Intermediate crude on Wednesday plunged a shocking 22.7% to trade at $21 per barrel. It is now at the lowest level since 2002! The good news? Lower prices at the pump....if you can leave your home.

Stocks found no relief from reports that the White House is urging lawmakers for $1 trillion in stimulus to cushion American workers and the economy from the impact of the coronavirus. Lawmakers were warned by the Trump administration that US unemployment could jump to 20% if no financial aid measures were passed. Lawmakers aren't wasting time getting stimulus to the markets and taxpayers, which is good news.

With the dual plight of an oil production glut and the coronavirus global pandemic, global commerce has been left at a virtual standstill and has undercut the lives and financial balance of millions of people who work in the service industry.

I have to say, this is one of the worst times I've ever seen in my 30-years in the markets.  Why? Because of the velocity and relentlessness of the selling. The Financial Crisis offered many opportunities to buy in, even while the market was falling overall.  Today's market has been a one-way street. Fifteen of the last twenty days have been down. Back-to-back up days haven't taken place since early February. Household names that would typically be the last ones to drop, have taken big hits.

On a positive note, all of the ingredients are in place for a large, multi-day oversold bounce. I'm not trying to paint a bright picture. Indeed, it is likely to take months of choppy or declining stock prices to work through the problems that have been exposed by the action over the past three weeks. But we will find a bottom, and I'm thinking sooner than later. All of the government stimulus and federal reserve easing being put out there is going to find its way into stocks one way or another.

Even during the worst bear markets, there are always very strong "rip your face off" rallies that work off the oversold conditions. We are on the cusp of one of those rallies.

At the lows yesterday, conditions felt worse than they did on the ugly markets of Christmas Eve, 2018. They also felt a lot like they did in October 2008. Back then, the S&P lost about 1/3 of its value in just three weeks. Then it exploded almost 20% higher in one week. In this market, we could get that in a day!

Of course, that wasn't the end of the decline. That didn't happen until March 2009. And, there were multiple swift declines and violent oversold rallies in the months in between. So, we're probably in for something similar for the next several months.

But, for the next few days, the market is set up for a "rip your face off" oversold bounce. We could see a 20-25% "pop" from here - which would boost the S&P 500 index back up towards 2,900 or so. A really wild move could get the index back up to 3150.

The bigger point is that yesterday certainly felt like a seller's exhaustion. That sets us up for an oversold bounce, which could be quite substantial. Following that, we're in for a several month-long period of big declines and big bounces as we carve out a bottom. Be ready for it if you're overexposed to the markets and have been "losing sleep". Use the bounces to reduce exposure or hedge your portfolios. We can help.

Whatever you do, this is not a market to chase big moves in stocks or funds. You will surely get another chance to get into this market if the rally is sustainable, so if you miss an initial move, be patient. You'll get many chances to buy back in. You don't need to be the first one into the foxhole.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.