Not including dividends, the S&P 500 was down exactly 20% in the first quarter.  It was up 19.95% in the second quarter.  Down 20%, up 20%.  If you think 2020 has been a joke of a year so far, it seems the stock market is in on it. 

This is a time where you will see dumb people getting rich.  The media loves stories about college kids running hedge funds out of their dorm rooms or ‘Davey Day Trader’.  Remember this is media, not journalism.   A similar experience happens at social gatherings.  I wear a mask to protect against spreading illness, but there’s nothing to protect against people who discovered the Robin Hood app (basically a brokerage account where you can trade fractions of shares) and want to brag about how good they are.  The Robin Hood trader may hit a home run and turn $500 into $2,000.  Great, but that’s not wealth.  If it were typical of the portfolio’s investment results, they would be telling me about this from their private island.  More than likely, the trading activity is a net negative, but represents such a small portion of the portfolio that it is negligible.  For them, the risk of underperformance is worth the chance to talk up the wins (even if they are just playing the penny slots).

Before our monthly commentary, I’d like to address the question we’ve gotten most often:  How are the folks at Fairway doing?  It is humbling to be in your thoughts, especially in times like these.  We are doing well and are fortunate to have been able to transition to a work-from-home stance relatively seamlessly.  It may feel like time has slowed over the last months, but life has not stood still.  When we return to the office, not only will we be celebrating several missed birthdays, but one of us will be returning as a new parent and another as a new grandparent! 

Fairway remains committed to proactively applying our expertise as stewards of our clients’ wealth.  We pride ourselves not only on the quantifiable results of our efforts, but also the peace of mind our clients enjoy.  As always, if anything has changed in your financial situation or if you just want to talk, reach out to us.  Chances are, we’ll be reaching out to you soon, too.

My name is Brian Tullio and I am excited to introduce myself as the newest member of Fairway Wealth Management.  I am a licensed attorney, and I hold a Master of Laws in Taxation as well as a CERTIFIED FINANCIAL PLANNER ™ Certification.  After practicing law at a boutique tax law firm, I spent over four years at The Cleveland Clinic Foundation as a planned giving professional creating sophisticated charitable plans for high net worth donors.  During that time, I experienced first-hand the dynamic and valuable advice financial advisors provide their clients.  I am thrilled to join the Fairway team, where I can utilize my unique professional expertise to help provide independent, sophisticated counsel to clients.

Until my time in philanthropy, I was unfamiliar with the phrases “planned giving”, or “gift planning”.  In short, the phrases refer to the process by which a donor can make a significant charitable contribution during their lifetime, or at death through their estate plan.  These types of gifts require additional thought and careful planning when compared to an average cash donation.  However, that additional planning is often time well spent, as planned gifts can yield significant financial and tax advantages.

Did the month of April feel more like a year to you?  The market might agree as stocks gained more in April than they do in the average year.  The 12.8% gain is the best monthly return since 1974, but comes on the heels of March’s 12.4% decline.  Back-to-back double digit whipsaw returns haven’t happened since the bottom of the 1974 bear market.

The S&P 500 is down 9% this year, but it says more that it dropped 34% from its all-time high then rallied 30%.  The S&P 1000 (Small and Mid Cap US stocks) and the MSCI EAFE (Developed International stocks) had similar large fluctuations and are down even more on the year.  The market has endured countless bull and bear runs.  This is its first bear sprint. 

As a firm, we’ve been blogging and talking to clients like crazy about the markets, the economy, investment strategy, etc.  Much of that communication comes from Matt Garrott, our Director of Investment Research.  But you may not know that Matt also maintains his own website and blog, at www.matthewgarrott.com.  While much of his blog is investment-oriented and aligns with Fairway’s content, he also posts about a wide array of other topics.  I thought his most recent post, copied below, was particularly applicable for many of us who are stuck at home and looking for productive things to do.

9 Ways to Wait Out the Remainder of the Quarantine

Got a deck of cards of Windows 95?

POSTED BY: MATT APRIL 14, 2020

Depending on how prepared you were, the early days might have been manic, establishing supply lines and hoarding toilet paper.  As churches and bars (trying to cover all bases here) stopped regular service it sank in that this was something that would last weeks, not days.  Now you’ve reached the end of the internet and you hold a strong opinion on Tiger King.  Here are 9 ways to wait out the remainder of the quarantine.  Some are productive while others are just stress relievers.  Regarding links: I don’t get anything from anyplace I’m linking to and I’m not endorsing anything, but hopefully they are a good place to start if something catches your eye.  In no particular order:

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What Happened this Quarter

The year in headlines started with the death of an Iranian General.  Concerns that this would start World War III fizzled and the markets shrugged their shoulders as even oil markets barely flinched.  Stories started circulating in January about a virus in China.  The United States was consumed with impeachment, confusion over the Iowa caucus, and the idea that Bernie Sanders was the frontrunner to win the Democratic primary.  The coronavirus shut down China, setting off ripples throughout the global supply chain.  On top of that, Russia and Saudi Arabia bottomed out oil prices over a disagreement in production.  Volatility roiled the US stock markets, setting off circuit breakers on multiple days.  COVID-19 spread across Europe and finally the United States.  Individual states have responded with quarantines and the nation has mobilized to support the healthcare system.  The press got their World War III – the enemy is a virus.

The S&P 500 peaked on February 19^th.  By March 23^rd, the S&P 500 was down 33.8% from the high.  This was the fastest bear market ever.  It then rallied 17.6% with the Dow Jones Industrial Average rallying over 20%.  In total, the S&P 500 is down 19.6% this quarter.  The market has made up some ground since the bottom, but high levels of volatility indicate that the bear may not be done.  The average absolute daily market move in March was 5%.  The historical average is about 0.70%.

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Tax Day has been extended! On March 21, 2020, the IRS announced that the federal income tax filing due date for 2019 returns is automatically extended from April 15, 2020 to July 15, 2020.  This extension applies to all taxpayers, including individuals, trusts, estates, etc.  This new filing date also extends the deadline for paying any 2019 federal tax due, along with penalties and interest.  Further payments on 2019 taxes are not due until July 15, 2020 and interest and penalties will not begin to accrue until July 16, 2020.  Unlike an earlier iteration of the extension, there is no limit on the amount of the payment owed.  As this is an automatic extension, no form or action is needed by taxpayers to qualify for this extension.

What about 2020 estimated tax payments? The due date for 1^st quarter 2020 estimated taxes has also been extended to July 15,2020.  However, 2^nd Quarter 2020 estimated taxes have not been extended, and they remain due June 15, 2020.  The due dates for contributions to an IRA or HSA have been extended to July 15, 2020.  While there is some expectation that most states will follow suit and extend their filing deadlines to July 15 as well, most have not yet done so, including Ohio.  We should have more clarity soon in the coming days as additional guidance is released.

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I guess I can say I’ve been around the business for a long while now.  As when in moments like our world is currently going through, I unfortunately am reminded so vividly of feeling this way before. The uncertainty, the doubt, that feeling of “I can’t believe this is actually happening”…and most impactfully, the fear.  I sense definite parallels to the period right after 9/11.  Our country and the world were dealing with real life and death issues, just like now.  We seemed to wake up to new fears every day, concerned about another attack, about anthrax and other weaponized drugs, about how New York would ever recover. Travel came to a halt, people were afraid to leave their homes, our government’s response was questioned, and it seemed like life as we knew it would never be the same. The stock market was down 7% the day after 9/11 and down by about 15% by the end of the week…after already being in a bear market after the dot-com bubble burst.

I see parallels to 2008 as well, when the financial crisis hit. It felt like every day I’d wake up and turn on CNBC to news of another company on the brink of collapsing, additional layoffs, the government trying to figure out how to stem the tide and another major selloff in the stock market that eventually cut market valuations by more than 50%.  In both cases, we were dealing with something we’d never seen before.  With things we never comprehended ever even happening.  It truly was surreal, just as things feel so surreal today.

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February came to a turbulent end with the S&P 500 down 3% or more during three trading sessions last week.  The S&P 500 was down 8.23% for the month and 8.27% for the year.  The 10-year Treasury yield is under 1.13% as a global flight to safety pushed yields down from 1.92% at the beginning of the year.

Fear-driven selling due to coronavirus is the lead story all over the media.  Both supply and demand were shocked as China aggressively quarantined its population.  Expect fewer reports on things returning to normal.  For example, after shuttering half of its 4,000 stores in China, Starbucks says 85% are now open.  Active coronavirus infections have been dropping by about 1,500 patients each day for the last two weeks.  Expect good news to be met with skepticism.

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