INVESTMENT COMMENTARY – FIRST QUARTER, 2021

The US economy contracted by 2.3% last year as a result of the pandemic. Economic activity dropped precipitously in late March of 2020 and then rebounded strongly in the 3rd Quarter. Much of the contraction obviously related to the curtailment of in-person activities such as dining, travel, and entertainment. Consensus forecasts, which assume the vaccines protect against COVID variants and prevent another wave of infection, call for the economy to grow 6-7% this year. However, we expect the economic recovery to exceed expectations due to pent-up demand...

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TAX DAY EXTENDED TO MAY 17

The IRS extended the individual federal income tax filing deadline for the 2020 tax year from April 15th to May 17th. The postponement provides needed time for tax preparers and taxpayers to navigate the unique and challenging circumstances related to the pandemic. Since the announcement, additional details have become available, and it is important to understand how they may impact you. Based on information available on March 24th, the summary below highlights the changes to filing and payment details for individual taxpayers.What has changed:2020 federal income tax return filing deadline…

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RISING RATES EXPOSE RISK IN FIXED INCOME

In recent years, the bulk of investors’ attention has been seized by the rising equity markets. The fixed income markets’ low yields and the expectations this would persist for the foreseeable future struggled to draw attention away from equities. In our view, this allowed complacency and a false sense of security to creep into fixed income markets. The recent move higher in interest rates has exposed the underappreciated risks present in the fixed income market.The 10-year Treasury yield reached its closing low for 2020 of about 50 basis points (bps)…

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IS NOW A GOOD TIME TO CONSIDER CONVERTING TO A ROTH IRA?

While the Biden Administration’s current focus is on economic stimulus plans, there is the prospect that tax legislation in the near future may increase taxes on many individuals’ income and estates. As such, one of the planning strategies to consider is to convert some or all traditional IRA assets to a Roth IRA. The important differences between a Roth IRA and a conventional IRA are in the timing of when the taxes are paid and in the requirement for a minimum distribution later in life. Most IRAs are funded with…

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SHORT SQUEEZES IN THE MARKETS

Investors who buy a stock are said to have “gone long” that stock. If I buy 100 shares of Apple, I’m “long” 100 Apple, expecting that the price will rise. There’s another way to try to make money called “being short” a stock. Here, I borrow 100 shares of Apple to sell, believing the price will fall, and I can pay back my borrowed stock at cheaper prices. I’m “short 100 Apple,” and have to “cover my short” at some point in the future, meaning I’ll need to buy 100…

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