Broker Check

Bumpy Start to 2020

March 31, 2020


First Quarter Market Summary


Stocks were hammered in the second half of the quarter.  After gaining 4.8% through February 19, 2020, the S&P 500 Index fell nearly 34% from its high to close at its low on March 23rd, just 33 days later.  From there, the index gained 15.5% through the end of the quarter to end down 19.6%.


The decline was incredibly fast, losing more than 20% in 22 calendar days.  The downturn provided an opportunity for investors to rebalance their portfolios by buying stocks.  Long-term investors should continue to monitor their portfolios for buying opportunities. 


The Federal Reserve and White House took unprecedented action early to mitigate the anticipated economic recession.  The Fed brought interest rates back to near zero and Congress passed a $2 trillion stimulus package for individual and business relief (more on this later).  Despite all of this action, stocks fell into a bear market.


Treasury yields plummeted during the quarter as a result of the Fed’s aggressive action and investor fears of a significant economic slowdown.  The 10-year Treasury yield fell to 0.68% on March 31st from 1.92% at the start of the year.  The rapid decline in rates was offset by widening spreads, so many indexes lagged Treasury returns. 


Below is a table highlighting various market index returns over the past 3, 12, and 36 months:






As I wrote in the 4th quarter commentary “Smooth Sailing in 2019,” it was easy to be in investor in 2019.  Little did we know that everything would change so quickly and so dramatically.  A 34% drawdown in slightly over a month and the VIX spiking from the mid-teens to over 80 caused many investors to question their positioning.  We found that many clients were willing to buy stocks as the indexes hit 20% and 30% losses.


In reaction to the severely declining economic landscape, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law on March 27, 2020.  The package was estimated at $2.2 trillion, or about 10% of 2019 US GDP.  The focus of the CARES Act was almost entirely on individuals and businesses outside of the financial sector. 


We will highlight some of the important provisions that will be especially impactful to many of our clients.


Impacts for Individuals


Tax Rebate – Most individuals earning less than $75,000 ($150,000 for married couples) can expect a one-time cash payment in the coming weeks.  They will receive $1,200 for each adult and $500 for each child, so a family of four can expect to receive $3,400. The rebates will be based on either your 2018 or 2019 tax returns (if you have filed) and will not be clawed back should your future filings make you otherwise ineligible. 


RMD Suspension – To give retirees an opportunity to leave their assets invested, the Act provides for an RMD waiver in 2020.  This means that any Required Minimum Distributions from IRA’s or 401(k)’s do not have to happen this year.  It is important to note that this is a waiver, not a deferral, so 2021’s RMD will be based on the December 31, 2020 value.  This waiver also applies to any 2019 RMD’s that were required to be taken by April, 1 2020.  This is a break for those who turned 70 ½ last year and choose to delay their first RMD until 2020.  We are diligently working through the list of clients that have to take an RMD to determine if there are any planning opportunities.  Each of you will be hearing from us shortly.


Early Retirement Withdrawals – Typically you have to wait until you are age 59 ½ before you can make a withdrawal from a retirement account without a 10% penalty.  In 2020, if you experience adverse financial circumstances as a result of coronavirus, you will be able to withdraw up to $100,000 penalty free.  The withdrawal will still be considered income, but the taxpayer will have the option to spread that income over the next three years beginning in 2020.  Even better, the taxpayer can avoid recognizing any income by repaying the withdrawal to the retirement plan within three year of the receiving it.


Unemployment Insurance – Eligibility has been expanded to include self-employed and those who have already exhausted existing state and federal unemployment benefits.  The federal benefit was also increased by $600 per week and is in addition to any eligible state benefit. 


Student loans – Federal student loan borrowers are not required to make any payments through September 30, 2020 and no interest will accrue on these loans during this time. 


Charitable deductions – A small change to taxpayers who take the standard deduction, taxpayers can take up to $300 of cash charitable donation “above the line” on their tax 2020 return.  This means that even if you do not itemize your deductions, you can still get a benefit. 


Impacts For Businesses


Paycheck Protection Program – Small businesses, those with less than 500 employees, including sole-proprietors, can access loans to cover costs of employee compensation, rent, mortgage payments, and utility bills.  These loans can be forgiven in part or in full if the business retains its payroll through this crisis.  (see “Weekend Reading 4/3/2020... Small Business Relief” for more details on this program)


Delayed Payroll Tax Payments – Employers may delay the payment of 6.2% payroll taxes until January 1, 2021.  These deferred payroll taxes will be due in two equal installments on December 31, 2021 and December 31, 2022.


Payroll Tax Credits – Employers who face significant disruptions in operations and revenue streams may be eligible for a 50% payroll tax credit on wages paid up to $10,000 per employee. 



The above is certainly not an exhaustive list of all of the provisions in the CARES Act.  As we all work through this unprecedented crisis, it is important to seek help from your trusted advisors.  If the coronavirus has had an impact on your financial situation, please reach out.  We are here to answer questions and talk through scenarios.


So far, thankfully, all employees and family members of HWA Financial have remained healthy.  We are practicing social distancing and are doing everything we can to have no business interruptions as a result of COVID-19.  We hope your family is healthy too. 


Stay safe, we will get through this difficult period together.    




JR Geld, CFA, CFP®          


Philip E. Huber, Jr, CPA, CFP®



HWA Financial Group

3448 Ellicott Center Dr.

Suite 101

Ellicott City, MD  21043