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Doesn't the Stock Market Know the Economy is Bad

After a precipitous drop in February and March due to the Covid-19 pandemic, the stock market has rebounded sharply, even with the recent pullback. The rise in stocks appears out of sync with an economy mired in a recession. What's up?

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Is Investing More Like Poker or Chess?

I started playing poker for pennies back in junior high school. One of our friends -- let's call him Lee (since that's his name and he's not on this distribution list) -- would often make highly questionable choices. Occasionally, he would win a hand after a bold move. When questioned, Lee answered: "I won, didn't I?"

Basing the reasonableness of a decision on what eventually happens is called "resulting." This perspective confuses the outcome with the soundness of the decision-making process. It fails to acknowledge that even reasonable choices can lead to negative results, while poor choices can sometimes achieve success.

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Why You Must Know These Boring Tax Law Changes

As if life isn't challenging enough these days, I'm strongly encouraging you to read about some significant changes to the tax laws. It's important to familiarize yourself with how the new rules in the SECURE Act and CARES Act can affect your life -- whether you're in your 20's or in your 80's.

Summarized below are some of the more salient provisions along with practical planning actions to consider taking.

Required Minimum Distributions -- You don't need to start taking RMDs from your retirement accounts until Age 72. On top of that, you don't have to take RMDs in 2020 at all.

Planning Tip:  Depending on your particular situation, a partial Roth IRA conversion may make sense. In fact, a conversion may make sense even if you are a long way from retirement.

Inherited Retirement Accounts -- For people passing away beginning in 2020, beneficiaries of retirement accounts must distribute the money they inherit within 10 years. Exceptions exist for spouses, minor children, disabled individuals, and people less than 10 years younger than the decedent.

Planning Tip:  If you have a trust listed as a beneficiary, please contact your attorney to see if it still makes sense in the new environment. Many trusts will need to be revised.

Hardship Withdrawals and Loans from Retirement Accounts -- Certain individuals impacted by the coronavirus can withdraw up to $100,000 without penalty, but taxes need to be paid within three years; however, the money may be paid back within that time frame to avoid the tax consequences. Loans of up to $100,000 can also be taken from certain employer-sponsored plans (not IRAs) with no payments due in 2020.

Planning Tip:  These actions should be utilized as a last resort to avoid impairing your retirement savings.

Additional rules and further information can be found by clicking the links above. I'm happy to discuss these matters with you in greater detail. You should, of course, consult a tax advisor before taking any particular action.

Musical Treat

These days require some upbeat music. But, if you wish to indulge a more melancholy mood, I recommend The Smiths. Check out these brilliant, misanthropic tunes: "What Difference Does It Make?," "Heaven Knows I'm Miserable Now," and "Panic".

When Doing Nothing is Doing Something

We typically applaud bold, decisive action, even though the action may eventually turn out to have been misguided. At least something was done. Doing something provides a sense of accomplishment.

Today, governments around the world face a demand for action with respect to both the health care and financial crises we confront. A significant response appears necessary to stem the pandemic and market decline.

In other situations, though, restraint produces the better long-term results. Restraint can prove difficult because it goes against our strong desire to do something. Restraint need not mean weakness; it can show fortitude.

Remaining in the stock market at this time presents itself as a case for prudent inaction. Diversification has helped ease the blow so you can stay invested for the long term. The following links offer some thoughtful reasons why you should hold the course: Vanguard and Morningstar.

Musical Treat

Hopefully you can find some joy in a couple of totally different songs -- Billy Preston's "Nothing From Nothing" and Jethro Tull's "Nothing is Easy."

4 Charts to Help You Stay in the Market

The roller coaster ride continues. It's difficult when you don't know when it will end, but most people I know are holding on tight.

Here are 4 charts that can provide you with some comfort along the way. Just click the links below:

Let me know how I can be of assistance.

Musical Treat

Social distancing can be made a bit more tolerable with a throwback look at The Ohio Players singing "Rollercoaster of Love" on The Midnight Special, with host Wolfman Jack. Old-time funk and some weird memories.

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