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Integrated Insights - Week of July 20, 2020

Integrated Insights - Week of July 20, 2020

July 21, 2020

As virus infections continue to climb, some state and local economies are slowing or reversing re-opening plans.  This will have the biggest effect on the small business economy, which could trickle up to smaller landlords & property owners. The lack of a clear re-opening plan with measurable waypoints has put business owners trying to plan in a state of chaos. While larger national & global companies can withstand local policy shift, the Main Street economy is different.  A divide continues between public company valuations on Wall St. & the precarious position of Main St.

Here's our reading for the week.

Student of the Markets July -- BlackRock

BlackRock's monthly chartbook always has interesting data to share. Here are a few points from July:

  • Record assets in money market funds: The amount of assets in money market funds is the highest it’s ever been ($4.8T).  The previous two records followed the Dot Com Bubble (Jan-03, $2.3T) and the Global Financial Crisis (Jan-09, $3.8T). Investors in money market funds at each time may have missed strong stock market returns over the next three years (16.4% and 19.2%, respectively).

  • Individual U.S. stocks vs U.S. stock funds: U.S. stocks are up 10.7% over the last five years, but more than half of the stocks in the S&P 500 lost money. Diversification proved more effective: only 7% of stock mutual funds and ETFs lost money over that same time period.

  • Interest rate environments and bond performance: 10-year Treasury rates are currently near historic lows. With the Federal Reserve resistant to negative interest rates, there’s more room for rates in increase than to decrease in the future. Some bond asset classes, such as High Yield and Bank Loans, have performed well in rising rate environments in the past.

Muni Bond Sectors impacted by revenue loss -- Capital Group

While most states derive the bulk of their revenue from personal income taxes and sales taxes, both are considered volatile sources of revenue given their reliance on consumption and employment. The decline in employment and reduced spending brought on by COVID-19 will put significant pressure on that revenue, which is used largely for education and health care-related expenditures.

Don’t Let Lifestyle Inflation Overtake You -- Hartford Funds

  • Lifestyle inflation happens when your household spending increases faster than your household income.

  • Studies show it’s particularly common for mid- career adults and Millennials.

  • Before spending any new income, it’s important to consider debt repayments, savings, and investments to help ensure a more secure financial future.
  • The best way to combat lifestyle inflation is to not let it sneak up on you. You’ve heard it a thousand times: planning is key. First, come up with some short- and long-term goals to guide your financial planning.