FINSUM + Magnifi: Big Tech’s Winners and Losers as the Pandemic Fades
April 20, 2021
The pandemic fueled growth in lots of different technology sectors, but it remains to be seen how permanent these changes are. Technology acceleration was high: FactSet expects earnings growth to jump 22% in Q1 2021 as compared to the same quarter last year. But after the pandemic fades which industries will remain? E-commerce companies like Amazon, Pinterest, and Etsy will likely stick around as many shopping patterns have changed permanently. Companies like Zoom and video companies will taper off as the workplace returns to normal. However, hardware and cloud computing will likely retain strong earnings given trends. Finally, chip manufacturing is still running shortages but Nvidia, AMD, and Qualcomm will have pent-up demand for the foreseeable future.
FINSUM + Magnifi: Goldman Says these S&P Losers Could become Outperformers
April 20, 2021
Q1 Earnings are starting to roll in for many companies and this presents an opportunity. Regression to the mean is almost an inevitability in the stock market, but timing it is difficult. But Goldman is advising its clients that 13 companies lagging the S&P 500 by 6% over the past month are going to post better earnings reports than Wall Street projects. These companies are Activision Blizzard, Air Products and Chemicals, CF Industries, Charter Communications, Edison International, Enphase Energy, Everest Re Group, Fiserv, Global Payments, Intercontinental Exchange, Leggett & Platt, McKesson, TE Connectivity, and T-Mobile. As many stocks are trading at record highs these underperformers could turn to outperformers at the turn of the next earnings report.
FINSUM + Magnifi: Gold Could Surge on Chinese Import Changes
April 20, 2021
China is one of the largest gold consumers in the world, but the pandemic has put the market in turmoil as supply couldn’t match. This has elevated domestic prices high above the international rates. However, China has permitted banks to import Gold into the country. This could be a boom to world gold prices as the country plans to invest $8.5 billion into imported gold in April for April and May supply. Vaccines and stimulus have halted Gold's growth as of late but a fundamental shift from a major bullion consumer might turn the market bullish.
FINSUM + Magnifi: 5 Growing Dividend Darlings Income Investors Should Know
April 16, 2021
65 Stocks make up the dividend aristocrats in the S&P 500, known for their consistency however some are growing faster than others. A.O. Smith (AOS), AbbVie (ABBV), Lowe’s (LOW), Illinois Tool Works (ITW), and S&P Global (SPGI). AOS who produces gas and water heaters, has the fastest dividend growth rate at 21% over the past five years while ABBV promises a higher yield of 4.9% and still a promising 5-year growth rate of 18%. All of these stocks have trend growth rates above 15%, but outside ABBV are on the lower end of yield return.
FINSUM + Magnifi: Biden Admin Planning A Big New Regulatory Push
April 16, 2021
The Biden admin is tackling some of the changes made during Trump's administration, particularly to environmental social governance, fair lending, and consumer protection rules. The administration will not allow a set of measures that disincentivize ESG factors by shareholder voting restrictions. They have also reinstated the Consumer Financial Protection Bureau’s ability to seek monetary penalties for abusive practices and expanded the Equal Credit Opportunity Act to gender and sexual orientation protection. Finally, the administration reinforced the SEC’s ability to investigate and subpoena companies and individuals for investigation. These measures are just some of the ways the new administration is changing the regulatory landscape.
FINSUM + Magnifi: Chinese Economic Data and Opec Demand Report Lift Oil Prices
April 16, 2021
China is one of the biggest importers of crude oil and good news on trade reports boosted the oil futures market. Imports in U.S. dollars rose in March by 38.1% from the prior year which was well above estimates. Additionally OPEC forecasts a 100,000 barrel a day increase in its oil demand projections for 2021. It expects it to climb to 96.5 million barrels per day by the end of the year. The upward revisions all come despite the slowing of the vaccine rollout from Johnson and Johnson. OPEC sees reopening and strong growth in OECD countries in Q2 and Q3 driving the oil demand. Oil was over $60 a barrel in futures markets.
Retirement Income
From pay cuts to reduced employer retirement savings matching, COVID has no doubt impacted retirement for many people planning to retire both in the near and far future. According to a MoneyRates survey conducted in late March 2020, 36.4% of Americans within 20 years of retirement expect the COVID-19 crisis will delay their retirement. That number might not seem so surprising when you consider that 37.4% of workers aged 45 to 64 have lost their jobs or a portion of their income, according to the same survey.
Even before the pandemic, only a quarter of Americans were on track with their retirement savings, inclusive of those in their 50s, according to the Edward Jones study, The Four Pillars of the New Retirement. In part, that is because what you need to retire is not a small number. According to Fidelity Investments, to retire by age 67, you should have 10 times your income saved.
While many employees are anticipating that they will be working longer to secure a sustainable retirement savings as a result of COVID’s economic impacts, others are retiring earlier than they planned in turn making their retirement a lot less comfortable.
Here’s how COVID and the down economy are impacting retirement.
Retirement 2021: Many people Are Retiring Early
Lots of older Americans are suddenly finding themselves out of work.
Some are actively hoping to rejoin the workforce. Between September and October 2020, the number of job seekers aged 55 and older who were out of work for 27 weeks or more and still looking jumped from 14% to 26.4%, according to the Bureau of Labor Statistics. Months later in December 2020, the unemployment rate held steady at 6.7%— meaning that older job seekers are facing increased levels of competition that is not likely to go away anytime soon.
Unfortunately, many older job seekers will never make it back to the workforce, at least not in full-time roles comparable to their previous positions. Approximately 4 million workers age 55 to 70 are expected to be forced into early retirement due to the COVID-19 pandemic, according to a report from the Retirement Equity Lab at The New School.
For those who have the option of staying in their current position, health and safety are a very real concern. The immune system becomes weaker as we age making older populations more vulnerable to COVID-19. The fact is that 95% of COVID-19 deaths in the US have occurred among people aged 50 or older. Workers between the ages of 55 and 65 simply face a greater risk than their younger counterparts, particularly if they have underlying health conditions, such as obesity, diabetes or high blood pressure. This means that older members of the workforce— those closer to retirement— face a challenging dilemma if they cannot work remotely: is the risk of getting sick worth returning to work at all?
For those retiring early, paying for health care costs before Medicare eligibility at age 65 can be extremely expensive. For those lucky enough to get a severance package, a continuation of health benefits for a determined length of time can be instrumental in making a more comfortable retirement possible.
Also, early retirees by choice or default should consider that claiming Social Security benefits earlier than planned can mean a smaller monthly benefit. A person’s Social Security benefit automatically increases 8% every year beginning at age 62 (for people born after 1943) until age 70.
For those retiring early as a result of the pandemic-stricken economy, they are generally doing so with less savings and fewer benefits available to them. This means that retirement itself means managing tighter finances for the long-haul.
Retirement 2021: Others are working longer
Not everyone is fast-tracking retirement. Even before the pandemic, one in four working households were not contributing to retirement savings. The pandemic has resulted in an additional 18% of households contributing less toward retirement, most to help buffer some loss of income, according to a survey by Bankrate.
According to The Four Pillars of a New Retirement report, nearly a third of Americans (29%) planning to retire have pushed out their plans for financial reasons related to the COVID-19 pandemic.
In part, this is because many older Americans are not just supporting themselves. One in four of all parents with adult children, or 24 million Americans, have had to provide their children with financial support due to the COVID-19 pandemic. People need more cash fast in the down economy, and they are looking to their retirement funds to get it.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March 2020, made it easier than ever for people to tap into their retirement savings. Through the CARES Act, “early withdrawals taken in 2020 due to COVID-19 hardships will not be subject to the 10% additional tax under Sec. 72(t) or the 25% additional tax on SIMPLE IRAs under Sec. 72(t)(6), if certain conditions are met.”
People are taking advantage of this access to retirement funds. According to a survey by Bankrate, upwards of 27% of those with retirement accounts have either already tapped into them or plan to do so.
The Power of Income
Experts warn against taking early withdrawals, if possible. Thinking long-term and staying the course by keeping up retirement contributions and taking full advantage of an employer match, for example, will pay off in the long run. To prevent having to dip into retirement savings, experts recommend prioritizing an emergency fund.
It’s also worth remembering that with the markets as volatile as they are, by taking an early withdrawal, you risk selling your investments at a lower value than they might be worth in the future. Even if the markets are doing well, by taking out retirement money early, you lose out on the potential future gains of that retirement plan money.
This is why an income-focused approach can be so powerful in the lead-in to and early years of retirement. With income coming in every month or quarter, your portfolio is not so much left to the whims of the market and can continue to build and live off of your nest egg for years to come.
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The information and data are as of the April 14, 2021 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
FINSUM + Magnifi: Goldman Sachs says High-Yield Bonds are Income Investors' Fixed Income Solution
April 13, 2021
The recovery has boosted the junk bond market as investors saw investment-grade bonds and government debt perform poorly in Q1. All but 10% of high yield debt is within five percentage points of Treasuries. This has put a squeeze on the possibilities of the return in the high yield market but it's the only fixed income market with any possibility of gains. But Goldman sees junk bonds going higher despite this, and that a growing economy with additional stimulus should provide an environment that produces good returns for more risky corporations. Additionally, junk bonds are uncorrelated with Treasuries and aren’t a hedge but diverse in a portfolio with
investment-grade and government debt.
FINSUM + Magnifi: This Sector is at Huge Risk from Biden’s Tax Plan
April 13, 2021
Treasury Secretary Janet Yellen released bits of the Biden administration's Future Tax plan which is linked to the $2.3 trillion infrastructure proposal. Titled “Made in America”, the plan eliminates many subsidies for fossil fuel companies and introduces a host of incentives for alternative energy. The treasury estimates that the fossil fuel measures will save $35 billion over the next decade. Such measures are the elimination of the drilling costs reduction, which on its own is estimated to generate $13 billion in the same decade. Additionally, the bill extends the investment tax credit for green energy and incentivizes sustainable aviation fuel. Finally, the bill raises the corporate tax rate from 21% to 28%.
FINSUM + Magnifi: Gold Bulls See Second Stimulus Package as Tipping Point for Another Run
April 13, 2021
Gold had one of its biggest runs last August, but gold funds and ETFs have been the real victors. VanEck Vectors Gold Miners is up 50% over the past year which is 1.5x the gain in Gold itself, and smaller miners have been gaining traction with Canadian Amex Exploration up 128% and Starr Peak Mining up 300% over the past 12 months. As the Biden administration looks immediately to another trillion-dollar stimulus infrastructure package after just passing the first one, many are worried about the ‘Cobra effect’, a phrase coined by Lawrence McDonald. Where stimulus will be short-lived and people will be short-changed with hyperinflation. Junior minors such as Amex and Starr Peak are capitalizing on new territory and are in a position to benefit from macro factors the most.