Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives, securities offered through Cambridge Investment Research Incorporated, a broker-dealer, member of FINRA SIPC. Investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus program.
James Nelson:
Good morning. And welcome to this week’s Financial Focus program brought to you each and every Wednesday morning right here on KROS. Well, it’s James and my brother John’s here today. Nate’s out of the office this week. So we’re kind of filling in for him, but hard to believe that we’re at the end of July here. We got baseball that’s started, although I don’t know how long it’s going to last. It sounds like the Florida Marlins had a lot of positive tests this week. So baseball is on for now, but we’ll see how long it lasts.
John Nelson:
Yeah, and that’s particularly surprising given the environment and the numbers these days. But I guess time will tell how long we stay with it.
James Nelson:
Yeah. Well, heck the Cubs are off to a good start. So that’s all that matters, I guess. Well, anyway, today we wanted to get into the program and talk about some current events going on, the big one being the second wave of the stimulus package. We had the stimulus package, the first one go out a couple of months ago that affected individuals and businesses to some degree, most individuals, not everybody, I guess. And now they’re talking about a second bill that was released, proposal that was released earlier this week. And the idea is to maybe pinpoint a few sectors, a few types of people, rather than having a broad stimulus bill, like the last one. So it’s going to be interesting to see how that plays out. Obviously we’re just in the proposal stage right now, but could turn into law here before too awful long.
John Nelson:
Yeah. I think you’re right. It’s definitely more direct. They’re trying to hit specific areas rather than the broad based package that was cut loose. Just trying to hold things together in a very difficult period of time. The big high points, again, second round of direct payments to individuals, a lot of money going there. That’s a big part of the GOP’s $1 trillion bid package that they have put together at this point. We’re seeing a lot of money doled out for education, over $100 billion in the education that’s split between 70 billion going to K through 12, 30 billion for colleges and an extra five leftover for governors to distribute as they see the need.
John Nelson:
You’re seeing a lot of money going to testing, which appears to be needed in a big way. And then National Health Institute, seen a lot of money here too. So businesses in a lot of cases are still going to continue to receive money, but they’re going to make this much more focused rather than the broad brush they used the first go of it. A lot of businesses receiving funds that didn’t necessarily need it. I think they’re going to try to be a lot more focused now that they’ve had the time to spend on this bill.
James Nelson:
Well, and I think that was needed. I mean, we could tell that the first go around was kind of a rushed package. And again, going back to the business, you look at a lot of the travel and leisure type business. Airlines, they got a lot of money and I guess a lot of that was probably needed. But a lot of other businesses that just applied also got the money and didn’t really have to prove too much to get the money. And then not a whole lot of oversight it sounds like moving forward on how that money is going to be used. Do they say that it has to be used for payroll and rent and legitimate business expenses, but in reality that obviously has not been the case and there’s not a whole lot of oversight.
James Nelson:
So yeah, I think the second bill, obviously a lot more thought was probably put into this. The other big area was the unemployment benefits. That additional $600 that the federal government was tacking on to normal unemployment benefits has been reduced probably by about 60 to 70%, somewhere in the range of 200 to 600 level. They don’t quite know where that’s going to fall, but the-
John Nelson:
Yeah, I think they’re really pushing for that 200 level based off the 600 that was in the first package. This second bill they’re wanting to reduce that. We’ll see if it sticks.
James Nelson:
Yeah. And the idea is wanting to get people back to work and not make more money by staying at home, which in a lot of cases has certainly been the truth. So there’s a lot of good things. I mean, I think most people are in agreement that it’s probably needed on an individual basis. We still have millions and millions of people unemployed. So certainly to some extent this probably does make sense, but as far as the businesses go, yeah, there’s plenty of businesses that are hurting, but hopefully those are the ones that are actually getting the money rather than anybody who applied the first go around.
John Nelson:
Yeah. And I think just having the focused area, giving it to businesses that need it, because again, where’s this money coming from? We’re continuing to add to the deficit. It’s very difficult to run deficits, sell debt or print more money rather than having a productive and sustainable economy over time. Hopefully this is a means of getting to the productive economy that we all hope for. It’s just, there’s a price to pay right now. And of course, nobody wants to see economic turmoil for anyone.
James Nelson:
Well, and I think that’s kind of how we wanted to tie it in as far as how it’s going to affect a individual’s portfolios. Obviously there’s going to be winners and losers with all this government intervention. It doesn’t go out equally to everybody. So having a disciplined plan and being able to look at what markets, whether that stock market or bond markets, commodity markets, who’s going to benefit from this package? Who’s not going to benefit so much from this package? And how does this relate to my individual investments, whether that’s a 401k at work, an IRA now that I’m retired, a Roth IRA that I’m contributing to? I think people really need to understand and take a look at how this government intervention is impacting the economy and impacting the markets and how it’s impacting their individual investments that they may own.
John Nelson:
I think the flexibility and the adaptability that one has for their portfolio is probably the biggest component this point in the game. We saw a significant sell-off in the market in a very short period of time, 35, 36%. A lot of government and federal reserve intervention in the bond market that has propelled the stock market back into the game. We’re not that far off, honestly, from all-time highs, even though there is still some room between there. But we’re not terribly far away from that. What type of things can be done if we do? We all hope that it doesn’t happen, but if we did see another sell-off, or if things get much more difficult for the economy as a whole, that’s obviously going to have significant impact on the stock and the bond market. How nimble can you be and what do you own and why you own it is I think probably the biggest key for individuals, not just in the next month or two, but probably the next 12, 18 months. This is going to be a long road ahead for all of us.
James Nelson:
Yeah, and I think the perfect example of that is just looking at a few of the individual sectors today. I mean, we’ve got the tech companies flying high, the household names that all of us are familiar with that have been flying high. And then we’ve got maybe industrials, again, travel, leisure, airline companies, commodities, generally speaking are still down north of 50% on an annual basis. So we’re seeing this huge disparity between a handful of tech companies that continue to do really well. And then we’ve got a couple giant sectors that are still down substantially from where we started the year.
James Nelson:
And again, that just comes back to what do we own in a portfolio? Why are we owning it? And do we want to continue on in it? And we find a lot of people just kind of put the 401k on autopilot, don’t necessarily make a whole lot of changes. And whenever things going up, maybe that’s fine, but in today’s environment, not such a good idea. And we feel like we can do a lot better than that by just making a few logical decisions on the front end of the allocation.
John Nelson:
Yeah. One other thing, we’re running out of time here, but the continued discussions in conflict between the United States and China certainly plays into the pandemic, but we’re seeing, it’s almost turned into a capital war, which would ultimately hurt the US Dollar. I mean, we’re looking at obviously tariffs and the trade war. There’s a technology war that’s long been in play fighting for the upper hand on that. Geopolitical war between countries and even internally. That’s a reality that we’re facing with a significant player in the global economy with China. US not on great terms overall, I think we could say at this point. We’re watching that very closely and the implications that can have for the overall market as well. So plays into the pandemic to an extent, but doesn’t seem like things are improving the last week or so when it relates to the US- China relations.
James Nelson:
And knowing where the dollar’s at, whether it’s strong or weak has a huge impact on foreign investments. So if you own an international fund, emerging markets fund, whether that’s a stock or a bond, knowing where the dollar’s at, knowing the direction the dollar is trending is very important. So all things to consider when putting an allocation together. If you have any questions, please feel free to give us a call. We’d love to sit down with you. So John, thanks for helping out this week.
John Nelson:
Yeah, happy to be here.
James Nelson:
This is a James and John with NelsonCorp Wealth Management. Thanks again for tuning in. Well, have a great rest of your day.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives, securities offered through Cambridge Investment Research Incorporated, a broker-dealer, member of FINRA SIPC. Investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.