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February 2020
Index Month Year
Dow Jones -13.6% -22.6%
 S&P 500 -12.3% -19.5%
NASDAQ -10% -13.8%
Barclays -0.58% +3.1%
10-Yr Treasury yield was 1.14% at the end of February and 0.66% at the end of March

 

Markets

As I’m sure you know, on March 30th the White House announced it was extending its coronavirus guidelines, meaning people are now urged to avoid crowds and stay home as much as possible through the end of April.* Naturally, that means the economic shutdown resulting from these guidelines will also continue for at least that much longer. The toll taken by the shutdown has already been massive, and with uncertainty, it’s little wonder the stock market has seen record high volatility. That’s true despite historic response measures taken by the government, which include a $2 trillion congressional relief package and emergency actions by the Federal Reserve.**

While these efforts may help with certain aspects of the crisis, I believe their impact will be limited, and that the long-overdue major correction I’ve been forecasting for years can no longer be artificially held off by the government. Even if Wall Street manages to gain back much of the 20 to 30% it’s already lost, I believe several more down-waves are likely in the months ahead, culminating in the 50% or greater correction that market history tells us is overdue.

Ultimately, this crisis offers a perfect illustration of why I believe it’s so important for so much investors over 50 to reduce their stock market risk by switching their strategic focus to income. As an income-based investor, keep three things in mind: first, any insured items in your portfolio (such as CDs, annuities and government bonds) have not been adversely affected by market volatility. Second, non-insured items such as corporate bonds and bond-like instruments may be down in value on your statement, but the dollar amount of your income hasn’t changed. Lastly, the loss is only a paper loss because these instruments have a par value that guarantees your investment will be paid back in full whenever the bond gets called or paid off, provided there is no default.

While the current economic crisis may increase the risk of default for some companies, I don’t see it as a significant risk in our portfolios. What’s more, actively managed income strategies like ours make it possible for account managers to continually minimize that risk while also taking advantage of new opportunities. With that said, if you do have questions or concerns about anything in your portfolio, reach out to my office so we can schedule a phone meeting. Most importantly, do everything you can to stay safe and healthy as we all work through this crisis together!

Portfolio Transactions:

When managing your portfolio at SIS, we look for one of four possible “enhancement” trades while reviewing securities and possible transactions. Income generation is our primary goal for our clients, and we consider the following four portfolio enhancements before transacting: current yield, yield to worst (minimum projected annualized total return), interest rate risk, and default risk. The intents of these transactions are categorized as follows:

  • Pay Me Now – Enhancing current yield
  • Pay Me Later – Enhancing yield to worst
  • Cover My Assets I. – Managing interest rate risk
  • Cover My Assets II. – Managing default risk

We evaluate the transactions by determining whether they meet one, two, three, or all four enhancements. A baseball analogy for this: SINGLES, DOUBLES, TRIPLES, and HOME RUNS.

There were no swaps for the month of March.

* “White House Extends Social Distancing Guidelines to the End of April,” Wall Street Journal, March 30, 2020
** “Fed Announces Vast New Emergency Effort to Boost the Economy, Politico, March 23, 2020

 

Note: The above trades were recent block trades and do not reflect all trades done on an individual specific basis. Sound Income Strategies, LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance is not an indication of future results. Be sure to first consult with a qualified financial advisor or tax professional about your specific financial situation before implementing any strategy discussed herein.

You are advised to give independent consideration to, and conduct independent investigation with regards to the information above in accordance with your individual investment objectives. Use of the Information is at the reader’s risk, is strictly intended for informational purposes in conjunction with the recipient’s due diligence, and should not be construed as a solicitation by Sound Income Strategies, LLC. Past performance will never indicate or guarantee future behavior. Sound Income Strategies, LLC does not represent or warrant that the contents of the document are suitable for you from compliance, regulatory, legal, or any other perspective. We shall have no responsibility or liability for your use or non-use of the document or any portion thereof.

Sound Income Strategies, LLC is registered as an investment advisor under the Investment Advisers Act of 1940 and is regulated by the SEC. Sound Income Strategies, LLC and its affiliates may only transact business or render personalized investment advice in those states and jurisdictions where we are registered or otherwise qualified to do so.

Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. The Retirement Income Store® , LLC and Sound Income Strategies, LLC are associated entities.

December 2020 Monthly Newsletter

November 2020 Monthly Newsletter

October 2020 Monthly Newsletter