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A year ago at the end of the Second Quarter of 2020, we were in an economic and social lockdown brought on by the Covid-19 pandemic.  The US and most of the world were under severe restrictions.  It’s been a long year.  Now, due to the availability of Covid-19 vaccines and behavioral changes in society, we have witnessed strong rebounds in the US and global economies along with lessening of social restrictions. 

US equity benchmarks closed the first half of 2021 at or near record highs as the economy reopened and more people returned to work.  The S&P 500 ended the first half of the year up 15.2%, the DJIA was up 13.8%, and the NASDAQ Composite finished the first half of the year up 12.9%.  Historic fiscal and monetary stimulus has provided a consistent tailwind since the Spring of 2020, and there is little evidence those efforts will be removed anytime soon. Source:  NASDAQ.com July 1, 2021

Going forward, we believe the main challenges for the economic recovery may be the spike in the highly contagious Covid-19 Delta variant and the possibility of new restrictions, continuing inflation for products and services across the board, and the Federal Reserve’s response to these inflationary pressures.  The question of whether price increases are “transitory” or long-term is yet to be seen. 

Fed Chairman Powell stated on July 27th, that inflation will likely remain elevated in the coming months before moderating.  He also said the Fed will not raise rates or begin tapering the purchase of Treasury and mortgage bonds that provide stimulus to the economy until they see “substantial further progress” toward their goal of low unemployment and stable inflation. Source:  Wall Street Journal, 07/28/2021

We recommend a review of your investment portfolio and financial plan to determine if any adjustments are needed for your short-term and long-term goals.  Please call our office to schedule a meeting at 508-240-0320.

INFLATION

What, Why, When?

Inflation can be defined as the rise in prices for goods and services and the decline in the purchasing power of money.  Three of the main reasons that contribute to inflation are an increase in the money supply, the resulting decline in the value of the Dollar, and a disruption in the supply chain for goods and services.  All three of these have occurred since the beginning stages of the pandemic.

The Federal government and the Federal Reserve rapidly infused the economy with stimulus money.  Trillions of dollars were printed to provide individuals and businesses with money to keep the economy functioning and the Federal Reserve began purchasing assets in order to inject liquidity into the economy.

A large, rapid increase in the money supply reduces the value of each dollar and therefore, the cost of goods goes up. Companies pay more for their supplies and they pass the cost on to the consumer.

Production of goods slowed during the pandemic due to employees becoming ill and wide-reaching economic shutdowns.   Supply chains for imports, especially from China, were disrupted and this significantly impacted the price and availability of goods.  

Too much money chasing too few goods = Inflation

A BRANCH OF NATIONAL SECURITIES CORPORATION · 59 FINLAY ROAD, PO BOX 2806, ORLEANS, MA  02653

Tel:  (508) 240-0320      FAX:  (508) 240-2309    www.brimmerfinancial.com

Securities offered through National Securities Corporation, member FINRA/SIPC.  Advisory services offered through National Asset Management, an SEC registered investment advisor.  Fixed Insurance Products offered through National Insurance Corporation.  Investing involves risk including loss of principal. The information provided is not directed at any investor or category of investors and is provided solely as general information about products and services or to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither National Securities nor its affiliates are undertaking to provide you with investment advice or recommendations of any kind.

COMMENTS AND OPINIONS

2020 was one of the most difficult and challenging years in recent history.  The Covid-19 pandemic, political unrest, social strife, and economic uncertainty were and continue to be major challenges we face in the US and around the world.  Going forward into 2021 we wish you and your families a hopeful, safe, and a Happy New Year.

The final quarter of 2020 produced both good and bad results.  COVID-19 vaccines were approved for health providers, first responders and high risk senior citizens here and abroad.  New treatments and additional vaccines continue to move through the pipeline.  There were and continue to be some vaccine detractors, who feel that the COVID-19 vaccines were introduced too soon, without adequate testing.  The majority of health professionals appeared to approve the vaccines.

As for the markets:  “Following the trend throughout the year, large U.S. companies have continued to post positive results.  The S&P 500, which tracks the 500 largest publicly traded companies in the U.S., was up 12.15% on the quarter and 18.4% for the year.  While the S&P 500 tends to be oriented heavily towards large growth stocks (like technology), the announcement of a COVID-19 vaccination reversed the trend of growth stocks outperforming value stocks (like blue-chip companies).  The equal-weighted S&P 500, which is more representative of the entire market, including value stocks, was up 18.46% on the quarter and 12.83% for the year, narrowing the gap between the two styles.  The Russell 2000, which tracks the performance of U.S. small companies, reached an all-time high. Rising 31.37% for the quarter it finished the year positive at 20.02%.”    

SOURCE: the Slaughter Associates Investment Committee, January 5, 2021

Last year, 2020, started off with a bang.  Our economy was very healthy. Stocks were moving steadily upward.  Interest rates were still very low.  Housing was also doing well.  Then came COVID-19 and the fallout.

Some parts of our economy did well and benefited from the restrictions brought on by the pandemic.  Many very large corporations, prospered October through December, 2020.  For example, Walmart continued to be granted permission allowing their customers to enter their stores in most states.  Small companies, a cornerstone of our economy, suffered with many businesses having to close their doors forever.  Family-owned shops and stores, like hair salons, bars, smaller restaurants and service companies, had restrictions placed on the numbers of customers who could enter their premises and how many days they could be open for business.  High Tech firms benefitted from the lock-down. Shipments of goods, especially electronic products, increased.  Sales of locally sold products and services decreased.  Commerce continued via on-line buying as Amazon and other similar firms benefited.  We look forward to the healthy return of shopping local and the continued support of local businesses.

In the New Year, we believe developing a financial plan is more important than ever.  Critical components of a plan are sustainable wealth and generational planning.  Inherited assets may provide younger generations the ability to purchase a home or avoid student loans and other long-term debt.  However, maintaining assets over generations can be challenging.   A good financial plan can provide a roadmap to overcoming the pitfalls.  Please call our office for more information on how we can assist in developing a sustainable generational plan for you and your family.

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A BRANCH OF NATIONAL SECURITIES CORPORATION · 59 FINLAY ROAD, PO BOX 2806, ORLEANS, MA  02653

Tel:  (508) 240-0320      FAX:  (508) 240-2309    www.brimmerfinancial.com Securities offered through National Securities Corporation, member FINRA/SIPC.  Advisory services offered through National Asset Management, an SEC registered investment advisor.  Fixed Insurance Products offered through National Insurance Corporation.  Investing involves risk including loss of principal. The information provided is not directed at any investor or category of investors and is provided solely as general information about products and services or to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither National Securities nor its affiliates are undertaking to provide you with investment advice or

Comments and Opinions

Second Quarter, 2020

As we enter the second half of 2020 we hope you and your family are doing well as we continue to deal with the impact of the Covid-19 virus on health, employment, businesses, the stock markets, and our way of life in general.  We have witnessed how national and local governments closed down their economies and restricted the movements of their citizens triggering a financial crisis as a result of a severe world-wide health threat.

In response to the crisis, The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed by Congress and signed into law on March 27, 2020.  The CARES Actis a $2.2 trillion economic stimulus bill which primarily includes $300 billion in one-time cash payments to individual Americans, $260 billion in increased unemployment benefits, the creation of the Paycheck Protection Program that provides forgivable loans to small businesses with an initial $350 billion in funding (later increased to $669 billion by subsequent legislation), $500 billion in aid for large corporations, and $339.8 billion to state and local governments.  The US Federal Reserve also acted swiftly by lowering interest rates and providing unprecedented liquidity to financial markets to ensure they would continue to function efficiently. The Fed is expected to keep interest rates low for the foreseeable future.  More stimulus funding is expected. This aid, while necessary in the short term, adds to our ever-growing national debt in the long term.

According to the US Bureau of Labor Statistics, the US unemployment rate as of February, 2020 was 3.5%.  In April, 2020 the Bureau reported the unemployment rate at 14.7%, the highest rate and largest month-to-month increase in the history of the data (available back to January, 1948). According to the Small Business Administration, there are 30.7 million small businesses in the USA which account for 99.9% of all US businesses. The SBA also reports small companies have been responsible for creating 1.5 million jobs annually and account for 64% of new jobs created in the United States. 

A BRANCH OF NATIONAL SECURITIES CORPORATION · 59 FINLAY ROAD, PO BOX 2806, ORLEANS, MA  02653

Tel:  (508) 240-0320      FAX:  (508) 240-2309    www.brimmerfinancial.com

Securities offered through National Securities Corporation, member FINRA/SIPC.  Advisory services offered through National Asset Management, an SEC registered investment advisor.  Fixed Insurance Products offered through National Insurance Corporation.  Investing involves risk including loss of principal.

The shutdown has severely impacted specific industries such as retail, hospitality, transportation, travel and tourism.  Small business owners have been sharply affected.  With the lessening of state and local restrictions these small business are working to adapt to new regulations and rules and fighting to keep their businesses alive.

Along with the bad news in the Second Quarter, there has been some good news.  Research has been progressing in the development of treatments and a vaccine. States have begun to reopen for business, employees have been returning to work, people have begun to resume travel and some of their usual activities.  Going forward, each State will have to find a balance between increased economic activity and the increase of Covid-19 cases that may put their citizens at risk and stress their healthcare systems.

Stock markets rebounded in the Second Quarter.  The S&P 500 closed at 3100.29 on June 30th, up from the March 31st close of 2584.59, a gain of 20%.  The Dow Jones Industrial Average closed at 25,812.88 on June 30th a 17.8% gain from its close of 21,917.16 on March 31st., and the NASDAQ Composite ended the Second Quarter at 10,058.77 gaining 30.6% from its close of 7700.10 at the end of the First Quarter, 2020.  Past performance is not a guarantee of future results

It is said that stock markets are forward-looking.  Markets may be looking to the economic future with encouragement from current research for treatment and a vaccine, the increase of testing capabilities, and progress toward the gradual reopening of the US economy.  We believe volatility will continue in the stock markets with new spikes of virus cases in certain areas of the country, the current divisive social and political climate, upcoming national elections in November, and residual damage that has been done to the economy.

Overall, we remain optimistic in the long-term and feel confident that the US and the economy will weather the storm caused by the pandemic as we have weathered many other challenges in the past.  However, with the recent volatility in the markets, we strongly recommend our clients call us to schedule a time to review their accounts.  We can help you determine if your portfolio’s asset allocation meets your current financial goals and needs or if rebalancing is in order.  We are here to answer your questions and address your concerns.

*We are updating client email addresses and it is important that we have your current email address.  Please call us if you have changed your email address or to confirm we have yours on file.

The information provided is not directed at any investor or category of investors and is provided solely as general information about products and services or to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither National Securities nor its affiliates are undertaking to provide you with investment advice or recommendations of any kind.  Opinions are subject to change with market conditions. The views and strategies may not be suitable for all investors and are not intended to be relied on for legal or tax advice.