BREAKING: March 20, 2020 - Letter to Our Clients at Jason Howell CompanySubmitted by Jason Howell Company | Developing High-Net-Worth Families on March 20th, 2020
This is the time when our family of clients rely on our expertise, judgment and character the most. And we are happy to serve. If you or a family member has been worried about the markets, feel free to share our most recent message (dated 03/20/2020).
March 20, 2020
Dear Family of Clients,
2:51 PM EST After weeks of indecision, there is a fiscal response coming from our Federal Government. And that response is starting to have a stabilizing effect on our financial markets. Below is a summary of what to expect next from the "PHASE III" legislative response.
FISCAL RESPONSE REVIEW
- PHASE I: On March 6th, President Trump signed ino law the Coronavirus Preparedness and Response Supplemental Appropriations Act. It's an $8.3 billion, bipartisan bill designed to stem the tide of COVID-19 (coronavirus). About $6 billion went to the Department of Health and Human Services (HHS) for medical supplies, research, treatments, telemedicine and drug purchases. Another $2 billion was/is designed for use by the Center for Disease Control (CDC.gov) to help coordinate efforts with state and local governments, to contain the virus
- PHASE II: On March 18th, President Trump signed into law the Families First Coronavirus Response Act designed to ensure free coronavirus testing, assist hourly service workers with paid sick leave and unemployment insurance. The bill is also designed to ensure that the children who typically receive free and reduced breakfast and lunch at public schools continue to receive those meals. It was passed by the United States House of Representatives one week prior but languished in negotiations until last Wednesday night
NEXT UP: PHASE III
Last night (March 19th) Senate Marjority Leader Mitch McConnell completed the US. Senate's Coronavirus Aid, Relief, and Economic Security Act (CARES). PHASE II (see above) was led by Speaker Nancy Pelosi in the US House of Representatives and this PHASE III bill has been lead by Majority Leader McConnell in the US Senate. Speaker Pelosi has been working on a US House version but it's likely the House version will be merged.
The stock market is waiting for this trillion dollar legislation. The stock market closed higher yesterday and had been "up" most of the morning (note: the stock indexes have not had two back to back "up" trading days in 5 weeks). PHASE III expectations and layers of daily monetary policy announcements have given the markets some hope (see link here to Federal Reserve Bank actions). Negotiations to reconcile the House and Senate version of the PHASE III CARES Act began at 10 am EST this morning. Here's what was included to get them started:
- $300 billion for forgivable small business loans if used for payroll expenses
- $208 billion for large industry loans or loan guarantees (airline, restaurants, etc.)
- $500 billion in checks sent directly to Americans ($1,200 per person making under $75K annually)
- $300 billion for delaying April 15 IRS tax payments and penalties for 90 days (filing is still required)
There are a number of other interesting items in this 247 page bill; for example a couple of line items about temporary federal student loan interest and payment forgiveness (60 days). Treasury Secretary Steven Mnuchin, who is leading the White House effort to get Congress to work together, expects negotiations to continue through the weekend with a possible vote as early as Monday.
Many lawmakers already admit that PHASE III is neither perfect, nor complete. It's part of the reason that there's been so much "negotiation." Some politicians (and leaders in finance) worry that PHASE III isn't big enough to stabalize the uncertainty caused by the new Coronavirus Economy. Regardless, the CARES Act will not be the last legislation coming from our government as a fiscal response. Regardless, the Federal Government is finally responding to the crisis.
One of the questions I get most from family, friends and your fellow clients is, "Is it a good time to buy into the stock market?" The answer of course depends on your long term financial plan; including your available cash. Here are three (3) questions that may help clarify your personal decision:
- Do I have enough cash (not income, cash) to pay my bills through the end of the year?
- Have I paid off all of my high interest debt?
- Am I comfortable with unrealized losses for up to three years?
If the answers to all of those questions is "Yes," you're in a better position than most to increase your market risk; but there are likely many other factors to consider. If you would like to talk about your financial position and how to optimize your plan during today's "Coronavirus Economy," just set up a call here.
As always, thank you for being a part of our family of clients. We will continue to keep up with the latest market movements on your behalf.
JASON & DOUG
Jason Howell Company is an independent, family wealth management firm run by two owners who consider it their family business. Jason J. Howell, CFP® and Douglas W. Tees, MBA are both married to patient wives and are dedicated to their kids. They have built a firm with a great reputation based in Northern Virginia and in 2019 the firm (founder) was listed as a TOP WEALTH ADVISER by WASHINGTONIAN magazine. They hope to honorably serve their growing family of clients for decades.
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