Insights

...the “Wall of Worry” we wrote about in last quarter’s Economic & Market Commentary. In the U.S., the S&P 500 Index increased 12% (price appreciation plus dividends) during the quarter, rising 68% from the March 23rd low. For the year, the index returned 18.4%, which is 11% above the February 19th, pre-pandemic high of 3,394. These results are phenomenal on a stand-alone basis, but even more pronounced in light of the S&P 500’s 31.5% return in 2019.

Major economies around the globe contracted sharply in March as the pandemic worsened, leading to a sudden drop in output and sharp rise in unemployment. It seemed the world stood still in March as we entered lockdown at home and abroad. As we turn the page on a difficult year, we look ahead to a brighter future. As always, risk and uncertainty remain, yet we have high confidence that the most challenging days are behind us and that the nascent recovery will continue in the year ahead.

All Hallows' Eve," aka Halloween, is a celebration observed in many countries on the 31st of October, the eve of the Western Christian feast of All Hallows' Day. It begins the observance of Allhallowtide, the time in the liturgical year dedicated to remembering the dead, including saints (hallows), martyrs, and all the faithful departed.

The IRS has struggled to address the problem of tens of millions of pieces of unopened correspondence, including payments. As a result of the backlog of mail that accumulated over spring and summer (unopened mail was estimated to number 12 million items), millions of taxpayers received balance due notices from the IRS. The IRS announced in August that it had suspended sending certain balance-due notices to taxpayers while it continued to process its backlog of unopened mail, which may, in some cases, contain the sought payments.

Howland Capital can help you make the greatest impact with your charitable gifts of cash or appreciated stock. With so many worthy organizations out there, we know it can be tough to decide. Kate Grundy, VP of Foundation Services, offers her suggestions for how to make the most impact with your charitable donations this year.

After many months of gathering virtually, members of the Howland team recently came together at Duxbury Beach Park and pitched in for an afternoon of cleanup at this beautiful reservation.

Pushed lower by monetary policy and direct market intervention (such as asset purchases) by central banks. The result has been that bond holders, who purchase these instruments expecting a steady stream of coupon income, have been forced to accept lower levels of income. Another reason investors purchase bonds is to receive their principal back at a specified time. Unlike stocks, bonds mature and return principal on a maturity date (some bonds have flexible maturity schedules based on “call” provisions that allow the issuer to choose when to redeem the bonds). Unless the borrower defaults – typically a last resort – investors will receive their money back at maturity plus interest earned over the holding period.

Those seeing the glass as half full pointed to better than expected second quarter earnings (reported during the third quarter), meaningful progress on a coronavirus vaccine, continued month-to-month improvements in macroeconomic indicators, and growing confidence that April 2020 marked the pandemic trough. Those on the pessimistic side pointed to widespread COVID-19 case resurgences, questions about the pace of the economic recovery, continued geopolitical turmoil, back-to-school anxiety, election uncertainty, and extended stock valuations when compared to depressed, COVID-impacted earnings expectations.

Six months into the global pandemic, the overall economy is making progress, which continues to be uneven. As restrictions were lifted and businesses reopened over the summer, the economy grew slightly; U.S. gross domestic product (GDP) recorded monthly increases in July and August, according to IHS Markit. However, the trend in growth is decelerating and many Americans continue to struggle. While Wall Street celebrates a strong equity market recovery, many on Main Street America are under significant financial pressure.

However, two IRS Notices published in June relating to distributions from qualified plans may be of interest.

The yield on the 10-year U.S. Treasury Note ended the quarter at 0.65% and after adjusting for expected inflation, yields are negative in “real” terms for high quality government bonds. This means that the purchasing power of the income generated from government bonds will likely fail to keep pace with the increase in the price of goods and services over time. While bonds offer safety in the form of low volatility and return of principal, return on capital will be scarce at best and the expected total return for this asset class will remain quite low. While a low return may be hard to accept, there are several reasons why we continue to own bonds in client portfolios.

While most of the Walt Disney Company’s theme parks remained closed during the second quarter of 2020, global stock markets experienced the rollercoaster ride of a lifetime. In the U.S., the S&P  500 Index increased 20%+ (price plus dividends) during the quarter, rising nearly 40% from the March 23rd low. While now down 3% year-to-date and 8% below the February 19th high of 3,394, memories of the breathtaking 34% decline during the first quarter are quite fresh in our minds. Outside the U.S., the second quarter story was similar, though less dramatic on the upside. Global stock prices, as measured by the MSCI All Country Worldwide Ex-U.S. Index, increased 16%, ending the quarter down 11% on a year-to-date basis.