The recovery in the financial markets hit some turbulence in October, as investors wrestled with anxiety about increasing COVID cases, doubts about a second round of stimulus, and uncertainty over the election. However, a surge in gross domestic product (GDP) in the third quarter may signal that the economy is on the rebound.
 
Through October 28, all major indexes had mostly recouped most of their losses from the COVID crash in March. However, all were down for the month of October. Below is each index’s return from October 1 through October 28:
 
S&P 500: -2.73%1
DJIA: -4.54%2
NASDAQ: -1.46%3
 
Here are the year-to-date returns of the major indexes:
 
S&P 500: 0.40%1
DJIA: -8.14%2
NASDAQ: 21.04%3
 
What spooked the markets in October? There are a few factors, but as is the case with most things in 2020, COVID may be the primary factor.

The COVID numbers are surging in the United States, suggesting that the end of the pandemic may be nowhere in sight. On Wednesday, October 28, the seven-day average for new daily cases hit an all-time high of 71,832, an increase of more than 20% in only a week.4
 
Twenty-nine states hit record levels for daily new cases in October. Forty states had an increase of 10% just in the last week of October.5 Thirty-six states had increases of at least 5%  in COVID-related hospitalizations in the final week of October.4
 
The surge in cases is leading to a new round of business closures and regulations. Illinois recently stopped indoor dining at bars and restaurants.6 Investors may be spooked by the prospect of a second round of closures and its impact on the economy. A new report from Yelp found that 60% of businesses that were shutdown for COVID will never reopen.7

The uncertainty of a second stimulus may also be a drag on the markets. In fact, Gary Cohn, former president and CEO of Goldman Sachs and former White House National Economic Council Director, says it is a primary factor driving the markets’ poor performance in October.8
 
He added in a recent interview that, “no one thinks we’re going to have stimulus until after the election,” and that, “we know that the markets do not like unpredictability.” He said that there was “100% probability” that stimulus won’t happen until after November 3rd, and possibly not until after the inauguration.8

Some recent data on mutual fund flows may provide insight into how investors feel about the financial markets. Through October 21, equity funds (including mutual funds and ETFs) saw net outflows for 11 consecutive weeks. That means more money flowed out of these funds than flowed into them.9
 
On the other side, taxable fixed-income ETFs have seen four straight weeks of net inflows. That may mean that investors are leaving equities for fixed income securities, even with interest rates near zero.9

On a positive note, GDP surged by 33.1% in the third quarter, beating analyst expectations of 32%. The third quarter number is the largest quarterly GDP gain on record, easily beating the previous high of 16.7% in the third quarter of 1950.10
 
Of course, the third quarter surge comes after a 31.4% decline in GDP in the second quarter. Even with the increase in the third quarter, the economy is still projected to contract by 3.5% in 2020.10
 
The markets and the economy have rebounded, but the future is still uncertain. This may be a good time to explore options that can protect your assets and lock-in your gains. Contact us today at Boston Independence Group. We can help you explore these options and implement the right strategy to protect your financial future. Let’s connect today and start the conversation.
 
1https://www.google.com/finance/quote/.INX:INDEXSP
2https://www.google.com/finance/quote/.DJI:INDEXDJX
3https://www.google.com/finance/quote/.IXIC:INDEXNASDAQ
4https://www.cnbc.com/2020/10/28/covid-cases-hospitalizations-continue-to-surge-as-us-reaches-critical-point-in-pandemic.html
5https://www.cnn.com/2020/10/28/health/us-coronavirus-wednesday/index.html
6https://www.cnbc.com/2020/10/28/5-things-to-know-before-the-stock-market-opens-october-28-2020.html
7https://nypost.com/2020/09/17/majority-of-covid-19-business-closures-are-permanent-report/
8https://finance.yahoo.com/news/stimulus-donald-trump-gary-cohn-markets-100-percent-probability-deal-wont-pass-before-the-election-214720697.html
9https://lipperalpha.refinitiv.com/2020/10/u-s-weekly-fundflows-insight-report-etf-and-fund-investors-focus-on-fixed-income-during-the-fund-flows-week/
10https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

​The COVID pandemic has changed nearly every aspect of society. It’s changed the way we work, the way we learn, and even the ways in which we travel and dine. The pandemic also disrupted the economy and the financial markets, triggering record unemployment and bringing the longest bull market in history to an end.
 
Given the financial volatility we have seen during the pandemic, you might think that Americans are also changing their retirement strategies. However, a new survey from Forbes and YouGov suggests that’s not the case.
 
The survey reached out to 9,675 people to learn more about their retirement planning. Many of the questions and answers focused on three main areas:

As the COVID pandemic hit the economy, the government passed the CARES Act to provide assistance to those who were impacted. One piece of the CARES Act allows 401(k) and IRA account holders to withdraw up to $100,000 without paying an early distribution penalty. They can also pay the taxes over a three-year period.1
 
While the pandemic may have created unemployment and other financial emergencies, few Americans are tapping into their retirement savings. According to the survey, only 4% of respondents took a 401(k) hardship withdrawal and 5% took a hardship withdrawal from an IRA.2
 
Most of those who took a withdrawal were younger in age. Among those ages 25 to 34, 8% reported taking a withdrawal. However, among those 55% and older, only 2% said they took a withdrawal from a retirement account.2

While few respondents said they had tapped into their retirement savings, 11% said they planned to work longer before retiring. Those ages 45 to 54 were most likely to give this response.2
 
The decision to work longer may be due to market volatility in 2020. However, it also could be due to a surprising reason - employers suspending their 401(k) matching contributions. Nearly 4% of respondents said their employers had suspended matching contributions, but that number could increase.2 In the years following the 2008 financial crisis, nearly 20% of employers with more than 1,000 employees suspended their matching contributions.3
 
If you’re concerned about volatility or if your employer has suspended contributions, consider meeting with a financial professional. Working longer is an option, but it’s not your only option. A financial professional can help you implement the strategy that’s right for your goals and needs.

In the survey, only 5% of respondents said they had made a significant change to their asset allocation and only 4% said they had lowered their 401(k) or IRA contributions. In fact, 72% of respondents said they hadn’t made any changes to their retirement strategy at all.2
 
While sticking to a long-term strategy is generally a good idea, there may be times when a change is warranted. If you haven’t reviewed your strategy recently, now may be a good time to do so.
 
Let’s talk about your strategy and whether it’s still right for your goals. Contact us today at Boston Independence Group. We can analyze your strategy and help you make adjustments where needed. Let’s connect today and start the conversation.
 
1https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers
2https://www.forbes.com/sites/advisor/2020/05/11/how-covid-19-has-changed-retirement-planning/#7f6080b6830d
3https://www.forbes.com/sites/advisor/2020/04/10/covid-19-employers-suspending-401k-matching-contributions/#30e0b7cd285f
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20418 - 2020/9/17