COVID-19 cases continue to grow, the hope for a vaccine grows as well.
One is certain and the other, perhaps, not so much. Meanwhile, we are all anxiously awaiting the next fiscal package from Congress, which has now reconvened but will go for summer vacation in August. Congress must deal with the scheduled end of the current supplemental unemployment benefits of $600.00 weekly and the subsequent effect that will have on consumer spending. The ability to get back to normal (work), for many businesses is hindered not only by the virus but also by the fact that many employees can currently make more income by not working.
The impact of the virus on all states and municipalities, relative to the lack of revenue due to the lockdown is quickly bubbling up to the surface. Many states were already struggling under the heavyweight of their state pension obligations. The New Jersey legislature, for example, just approved $9.9 billion in new debt to offset lost revenues and the Governor has indicated another $20 billion may be needed by year-end.
The rapid rise in corporate debt, the increasing corporate bankruptcies, and difficulty of determining just exactly how these high levels of unemployment will sort themselves out, adds to a very murky picture of our future. The increase in COVID-19 cases and reopening rollbacks will certainly delay things, and unfortunately, put more small businesses completely out of business.
Waiting just around the corner is the November elections and the potential effect on taxes, which could be substantial. Possibilities include the replacement of the current long-term capital gains tax rates when selling stocks or bonds with much higher rates. Also, there is talk of eliminating the “step-up” in basis beneficiaries receive on an inheritance, This will create a large tax bite for anyone who receives an inheritance. So much for that student loan payoff!
These are just a couple of the many tax changes that could be on the horizon. Professional investors won’t wait for these changes to occur and will sell in 2020. Thinking about tax planning is critical and needs to come quickly into focus. Waiting until November is not recommended. Talk to your tax professional now about strategies you should be considering. If you need to find a tax professional, the best time is now, and we can help. Just ask.
All Investors need to be careful here, markets have run up very fast, and playing defense with your investments is a smart strategy. Employing risk-mitigating investments along with assets that work to complement each other makes sense here.
Your friends,
Doug & Tom