Pennsylvania Trust

All posts tagged coronavirus

Jobless Claims Continue to Soar

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Earlier today, the Department of Labor confirmed that between March 14th ad March 28th, almost 10 million people filed for unemployment benefits representing more than 6% of the entire U.S. labor force. The monthly jobs report tomorrow is unlikely to show the full extent of these layoffs as the reference period will only capture the beginning of the COVID-19-related shutdown.


Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.

State of the Markets – March 28

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Market indices rebounded this week by roughly 10% as Congress passed, and the President signed into law the CARES Act. In addition, the Federal Reserve increased its response and has committed “whatever it takes” to ensure the financial markets remain stable. While COVID-19 cases are clearly escalating domestically at an alarming pace, we believe the market has priced in much of the potential damage to the U.S. economy. As seen this week, stocks may be forming a bottoming pattern, but as in past bear markets, volatility should be expected, and the markets may retest the lower bounds.

While we believe the economy is in a recession, 2020 should be different than 2008-2009. The unemployment numbers are undoubtedly shocking. However, the areas currently affected — mainly retail, travel and leisure, and hospitality — represent a considerably smaller share of GDP than the finance and housing industries did then.

The trajectory of the recovery will depend on three factors:

  1. The spread of the virus
  2. The extent of damage mandatory closures and “social distancing” inflict on the economy
  3. The effectiveness of health, fiscal and monetary policy in mitigating the damage

In last week’s note, we introduced the three phases we believe the markets will follow throughout the crisis. The first phase, dominated by elevated uncertainty and anxiety, has been characterized by high volatility and unusual correlations (indiscriminate selling). We now feel that we are nearing the end of this phase and will look to episodic leveling and the effectiveness of the monetary and fiscal responses to provide cues.

Given this framework, we continue to approach equities with patience but acknowledge that the volatility will create opportunities. As a result, we continue to look for occasions to upgrade individual holdings. At the same time, risk management techniques — such as rebalancing and being mindful of sector exposures and concentrations — remain critical as we navigate the current market landscape.

Please feel free to reach out to anyone on your team with perspectives or questions you have. Remember to check Twitter, LinkedIn, and our blog. We will continue to email more comprehensive views as this environment develops.

We thank you for your ongoing trust and partnership and wish you and your family good health.


Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.

CARES Act Highlights

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Today, the U.S. House of Representatives passed, and the President signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act. The CARES Act is designed to boost the economy by providing over $2 trillion in relief, ranging from individual rebates to increased unemployment benefits to tax breaks. Here are some highlights of the CARES Act (the “Act”), with more detail to follow.

Recovery Rebates for Individuals

The Act provides for payments of $1,200 for singles and heads of households ($2,400 for married couples filing joint returns), and a $500 payment per qualifying child dependent under age 17. The rebates phase out at a 5% rate above the following adjusted gross income (AGI) levels: $75,000 (single)/$112,500 (head of household)/$150,000 (joint). Eligibility will be determined based upon 2019 (if filed) or 2018 tax returns, or in the absence of a return being filed, the Social Security Benefit Statement (Form SSA-1099). The payments will not be counted as taxable income because the rebate is a credit against tax liability. An individual who is claimed as a dependent on another individual’s tax return is not eligible for the payment.

Special Rules Regarding Retirement Funds

  • Required Minimum Distributions (RMDs): RMDs are waived for 2020. The waiver includes RMDs that must be taken by April 1, 2020 due to the account owner turning 70 ½ in 2019. The recently passed SECURE Act raised the age that individuals must begin taking distributions from 70 ½ to 72, but this change does not apply to individuals who turned 70 ½ in 2019. Distributions from inherited IRAs are also waived for 2020.
  • Hardship Distributions from IRAs and 401(k)s: People affected by the coronavirus can access up to $100,000 of their retirement savings without being subject to the 10% penalty that normally applies to distributions taken before age 59 ½. These so-called hardship withdrawals are taxable to the account owner, but the tax can be paid over three years, rather than in the first year. Alternatively, the owner can repay the distribution to the retirement plan within three years and avoid having to pay tax. To qualify for a hardship withdrawal, the account owner or his or her spouse or dependent must have been diagnosed with the coronavirus or lost income due to a business closure, layoff, quarantine, reduction in hours or inability to work due to lack of childcare.
  • Loans from 401(k) Plans: Participants in 401(k) or similar plans who have been diagnosed with the coronavirus or affected by economic losses related to the virus can take a loan from the plan over the next six months up to the lower of $100,000 or 10% of the account balance. This is an increase of the existing $50,000 loan limit. Individuals with existing 401(k) loans can delay repaying any loans due in 2020 for one year.

Changes to Charitable Contributions

The Act added an above-the-line deduction of up to $300 for charitable contributions made in cash by individuals who do not itemize deductions, in addition to the standard deduction. This provision is applicable for the tax year 2020 and beyond.

For individual taxpayers that itemize deductions, cash contributions made during 2020 will not be subject to AGI limitations. Prior to tax year 2020, an individual’s charitable contributions made in cash were limited to 60% of their AGI.

For corporate taxpayers, charitable contributions will be limited to 25% of taxable income, as opposed to the current 10% limitation.

Please contact any member of your Pennsylvania Trust team if you have any questions about the CARES Act, or other recent coronavirus-related legislation and how it might impact you.

 

Francis X. Mehaffey is Senior Vice President and Director of Tax Services for Pennsylvania Trust.
Contributing author: Leslie Gillin Bohner, Esq., Executive Vice President, Chief Fiduciary Officer and General Counsel of Pennsylvania Trust.

COVID-19 Lockdown Leads To Largest Jump In Initial Jobless Claims Ever

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According to the Labor Department, the number of Americans filing for unemployment benefits climbed to a record 3.28 million in the week ended March 21, as businesses temporarily closed and furloughed workers in the fallout from the coronavirus. The figures far exceed the previous weekly high of 695,000 set in 1982 and the 665,000 set in March of 2009.


Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.

Managing Through Turbulent Times

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Active Management. When I hear that phrase, two thoughts come to my mind: (1) this is how our senior leadership team at Pennsylvania Trust works to position our company for long-term success; and (2) this is how our portfolio managers work to position our clients’ investments for long-term success. Both of these observations are relevant to our coronavirus response.

As applied to running a business, most people would agree active management is critical. Indeed, we have not only been active — but really proactive — in managing Pennsylvania Trust. Recognizing the importance of talent, over the years we have focused on hiring top professionals in their specific areas of expertise, whether that was investments, financial planning, trusts and estates, tax, sales and marketing, finance and accounting, human resources, or technology and operations. More than that, we have been careful only to hire colleagues who truly care about our clients, and each other, and who are committed to delivering consistently excellent client service — no matter what the circumstance. In addition, we have empowered our talented, caring colleagues with state-of-the-art technology which, among other things, has allowed us to successfully navigate the “new normal” of working remotely during recent weeks. Thanks to this combination of talent and technology, we continue to work seamlessly on your behalf.

As applied to the investment world, the benefits of active management may be less obvious, although equally important. During the last decade, of course, the popularity of passive investing soared as getting low cost index returns was an attractive option in a bull market that lasted the entire decade. Even there I would point out that our actively managed, proprietary equity strategies outperformed their benchmarks during that decade. But, more importantly, active investment management will become essential in the 2020s. Market volatility — absent for much of the last decade — has returned and hit all-time high levels. The long equity bull market has ended in dramatic fashion for unprecedented reasons. We live in a “new normal” investment climate, one where future cash and bond returns likely will be subpar, and thus one where maximizing risk-adjusted equity returns will be essential. That is the role of active management — and our experienced team has been doing this very well for many years. I would add that Fiduciary Trust shares this same commitment to active management, so this approach will not change after our combination. (We are on track to become part of the Fiduciary organization, as of May 1st).

As the coronavirus continues to impact our lives, please know that Pennsylvania Trust is well-positioned to help you navigate these unsettled times and to help you meet your goals. We embrace that mission and thank you for your continued confidence in us.

George C. McFarland, Jr.
President and Chief Executive Officer


To follow the latest updates from Pennsylvania Trust, follow us on Twitter, LinkedIn, or check our Investment Blog.

Latest COVID-19 Posts

State of the Markets – March 28

Market indices rebounded this week by roughly 10% as Congress passed, and the President signed Read more

CARES Act Highlights

Today, the U.S. House of Representatives passed, and the President signed into law the Coronavirus Read more

COVID-19 Lockdown Leads To Largest Jump In Initial Jobless Claims Ever

According to the Labor Department, the number of Americans filing for unemployment benefits climbed to Read more

Managing Through Turbulent Times

Active Management. When I hear that phrase, two thoughts come to my mind: (1) this Read more

COVID-19: An Investment Framework

As we work through these challenging times, we want to assure you that your Pennsylvania Read more

COVID-19: An Investment Framework

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As we work through these challenging times, we want to assure you that your Pennsylvania Trust team remains focused on your financial well-being and hopes that your family remains healthy and safe.

Our entire team has been working diligently to keep everyone informed of the changing landscape as well as to help answer any of your wealth management questions.

If you haven’t been doing so, we want to remind you to check our investment blog. Each day (and sometimes throughout), we are posting observations intended to provide context to the day’s market action. While our investment teams are working remotely, they have been focused on the markets and the securities held across the firm. We have instituted twice-daily meetings to share ideas and to hear important client feedback. As we navigate this landscape, we want to be sure we are considering not only near-term factors but that our accounts are positioned appropriately to adjust to the “post-pandemic” environment.

As we look to past challenges and volatility, it is helpful to divide the crisis into three phases:

  1. Elevated uncertainty and anxiety evolve as the crisis evolves; emergency health, monetary and fiscal plans are developed.
  2. Remedies targeted for crisis resolution are in place, and early signs of moderation are observed.
  3. Economic impacts are better understood, mitigation efforts are largely successful and signs of normalization return.

We believe these phases apply to this current pandemic and that there are and will be investment opportunities that will be appropriate throughout each phase. As we are in phase one – we recommend that investors fight the urge to sell risk assets indiscriminately. Our portfolio managers know what is owned in client accounts and have taken care to build portfolios of high-quality assets that should withstand this true test of time. They will be examining opportunities to upgrade positions as we identify companies and funds that will have a competitive advantage throughout and after the crisis.

This first phase will continue to be dominated by high anxiety and uncertainty. However, the “flattening of the curve” (both domestically and in Europe) and eventual success of healthcare, monetary and fiscal responses will offer clues that will transition the markets into the second phase, subsequently opening investment prospects.

In advance of this, our investment team will be working to identify the asset classes, sectors and individual companies that will be best positioned for success post-COVID-19. Once we are more confident that a market bottoming process has been established, we will look to rebalance portfolios to capture broader opportunities.

While the prospect of adding to equity positions is often a difficult conversation to have during periods of duress, history has proven that the markets are resilient. Ensuring that portfolios remain properly balanced will ultimately allow us to help you reach your financial goals.

We continue to believe that the economic and market disruption will prove transitory and, while extremely painful in the short term, will be contained within this calendar year. Once we progress from phase two to three, the combination of low equity valuations, low interest rates and low energy prices will likely enable the markets and the economy to resume a more normalized growth pattern as we go into November’s presidential election.

Pennsylvania Trust remains fully operational during this challenging time. Please feel free to reach out to anyone on your team with any perspectives or questions you have. Remember to check Twitter, LinkedIn and our blog, and we will continue to email more comprehensive views as this environment evolves.

We thank you for your ongoing trust and partnership and wish you and your family good health.

Sincerely,

Jonathan M. Heckscher
Senior Vice President
Director of Fixed Income and Chief Investment Officer


To follow the latest updates from Pennsylvania Trust, follow us on Twitter, LinkedIn, or check our Investment Blog.

Latest COVID-19 Posts

State of the Markets – March 28

Market indices rebounded this week by roughly 10% as Congress passed, and the President signed Read more

CARES Act Highlights

Today, the U.S. House of Representatives passed, and the President signed into law the Coronavirus Read more

COVID-19 Lockdown Leads To Largest Jump In Initial Jobless Claims Ever

According to the Labor Department, the number of Americans filing for unemployment benefits climbed to Read more

Managing Through Turbulent Times

Active Management. When I hear that phrase, two thoughts come to my mind: (1) this Read more

COVID-19: An Investment Framework

As we work through these challenging times, we want to assure you that your Pennsylvania Read more
Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.

Potential Sign Of A Turning Point In Europe

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According to data released Sunday afternoon, the rate of increase of positive coronavirus tests has slowed markedly in Europe over the past day. The markets will surely scrutinize this data as it looks for clues that will ultimately help develop a bottoming process.

We noticed a general flattening of the growth rate curve in most of Europe over the past few days but the timing of the decline is both surprising and encouraging.

While the situation remains fluid and the data is subject to revision, if the numbers are sustained, we would expect subsequent data to begin to confirm the tipping point in Europe’s battle against COVID-19.


Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.

COVID-19 Threatens More Than 15 Million U.S. Hospitality Jobs

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The service industry will be one of the hardest hit by the economic slowdown being caused by the COVID-19 coronavirus. Almost 50% of states have now closed (or restricted) bars and restaurants, while others have imposed curfews and have closed non-essential businesses. In most large cities, hospitality workers make up more than 10% of the total workforce, with New York leading the way with more than 1,000,000. Miami will also be hard hit as the industry supports 14% of its working population.

The jump in jobless claims reported this week, to 281K from 211K, is nothing compared to what’s coming next week. The cut-off date for yesterday’s report was last Saturday, so the pick-up in closures, furloughs, and layoffs at restaurants, bars, and other consumer-related establishments will appear in the data for the week ending tomorrow. We have tried to piece together accurate numbers, but this remains a fluid situation hence hard to predict. Being said, the magnitude of the increase in the number of claims in recent days, compared to the previous week, seems to be about tenfold. Southern states have reported fewer cases of the virus, and it is hard to gauge the effect that will have on numbers. On the other hand, California alone has reported over 200k in the past four days (according to the governor).


Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.

Getting Through Difficult Times Together

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We have seen unprecedented efforts at the municipal, county, state and federal government levels to slow the spread of the coronavirus by shutting down “non-essential” businesses, among other restrictions. These efforts hopefully will be successful in the fight against the coronavirus, but in the meantime they undoubtedly will cause significant near-term harm to our economy, which is being reflected in the stock market volatility seen over the past week.

Added Precautionary Measures

Given that so much has happened, I want to provide an update on what we are doing at Pennsylvania Trust to ensure that our business runs smoothly. First, let me emphasize that as a non-depository trust company, we are considered to be a bank, and as such, we are an essential business that will not be ordered to close. Beyond this, our management team implemented a mandatory remote working policy for most of our employees, effective immediately. While we have had no incidences of infection from the coronavirus, we are taking this added precautionary measure to further safeguard the health of our colleagues so that they may continue to deliver excellent service to our clients during these challenging times.

We Are Fully Operational

Please be assured that Pennsylvania Trust is — and will continue to be — fully open for business. While most of our employees are now working remotely, our clients and others can reach our colleagues the same way as always – by phone or by email. We continue to be able to offer conference calls as an alternative to in-person meetings. Thanks to technology, our ability to move funds, monitor client portfolios, and make trades remains the same as before.

As a client of the firm myself, I feel very secure knowing that our investment team selects securities with a quality bias (strong cash flows and leaders in their respective industries) and that our highly-experienced portfolio managers understand what we own and why we own it. There certainly will be opportunities that are created as market volatility continues. There also will be planning opportunities that our talented financial planners and trust officers can discuss with our clients.

I am proud of our team and thankful for the confidence our clients continue to place in us. There will be better days ahead. In the meantime, I hope everyone stays healthy and safe. We will get through these difficult times together.

Sincerely,

George C. McFarland, Jr.
President and Chief Executive Officer


To follow the latest updates from Pennsylvania Trust, follow us on Twitter, LinkedIn, or check our Investment Blog.

Latest COVID-19 Posts

State of the Markets – March 28

Market indices rebounded this week by roughly 10% as Congress passed, and the President signed Read more

CARES Act Highlights

Today, the U.S. House of Representatives passed, and the President signed into law the Coronavirus Read more

COVID-19 Lockdown Leads To Largest Jump In Initial Jobless Claims Ever

According to the Labor Department, the number of Americans filing for unemployment benefits climbed to Read more

Managing Through Turbulent Times

Active Management. When I hear that phrase, two thoughts come to my mind: (1) this Read more

COVID-19: An Investment Framework

As we work through these challenging times, we want to assure you that your Pennsylvania Read more

Fed’s Move Highlights Risks To Economy

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As we all acknowledge, the coronavirus (COVID-19) has globally altered normal activities of all individuals and businesses. At this point, the crisis in the U.S. is expected to accelerate in the coming weeks, as the number of positive tests will likely increase exponentially. As a result, it is important to recognize that this pandemic is very different from prior economic shocks. 2008 was primarily centered around the financial industry and housing. The 2001 dot-com recession was due to an asset price bubble, and the oil embargo of 1973 was a geopolitical event.

Another factor that makes this unique is that the global economy was in an upswing at the time of the outbreak, and the U.S. specifically was experiencing its lowest unemployment in 50 years at the same time net worth was at an all-time high. Both should bode well for the economy’s ability to bounce back from what will be a dramatic decline in economic activity.

We now expect that this will generate an immediate contraction of economic activity, including consumption, production, and business investment spending, as well as a decline in employment. The ultimate scope of the drawdown will be determined in large part by the intensity and duration of the virus. We believe the shape of the recovery will depend on household and business confidence, among other factors. Our expectation is that some economic activities will be slow to recover, such that the overall rebound may not be as strong as the magnitude of the decline.

We applaud the Fed’s recent action. They have acted aggressively in lowering rates to 0.00-0.25%. Further, they are re-engaging in large-scale asset purchases ($700 billion) and other credit easing and liquidity provisions to ensure the banking industry continues to operate without major disruption. These actions reflect the committee’s concerns that the health crisis has the potential to become a financial crisis that would magnify the economic effect. Ultimately, while these measures may not be able to prevent a recession, they will aid in the eventual economic recovery.

In the subsequent news conference, Chairman Powell acknowledged that the crisis will need to be addressed with a combination of fiscal and monetary measures to help lessen the effect while supporting the health policies as they are introduced. In light of their emergency meeting today, the Fed canceled the regular meeting, which had been scheduled for March 19th.

Click here for further market perspectives.

 


Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.