FROM OUR DESK

Have a Wonderful Memorial Day Weekend! May 21, 2020
Downloads: Memorial-Day-Letter-2020.pdf

In honor of Memorial Day, we’d like to tell you a story about a man named Ben Salomon.

Ben Salomon was a dentist.  He went to school, got his degree, and started his own dental practice at the tender age of 23.  The most trying ordeal he was ever supposed to encounter was a mouth full of cavities or a particularly tricky root canal.  But when his country called, he answered – serving as the dental officer for the 105th Infantry Regiment of the U.S. Army.

The year was 1942.

Ben Salomon was a dentist, but he still had to train like a regular infantryman.  He qualified as an expert with both rifle and pistol and was even declared the unit’s “best all-around soldier” by his commanding officer.  Soon, he was promoted to the rank of captain.  Two years later, he went into combat – specifically, to an island in the Pacific called Saipan.

Ben Salomon was a dentist.  But during combat, a toothache was the furthest thing from most men’s minds.  The Battle of Saipan was fierce, with the U.S. suffering over 13,000 casualties.  So, with little dental work to do, Salomon volunteered to go to the front lines, to replace one of the surgeons who had been wounded.

It was July 7, two days before the battle would end.  As the U.S. advanced across the island, the wounded began to pile up, and it wasn’t always possible to transport them back to the regiment’s main base.  So, Salomon set up a tent barely fifty yards from the frontlines to serve as an immediate aid station.  Just after dawn, approximately 4,000 Japanese soldiers launched one of the largest counterattacks of World War II.  Within minutes, Salomon’s tent filled up with wounded soldiers, many of whom had to be physically carried in.  Undaunted, Salomon got to work, trusting the line would hold and the enemy be repelled.

That was when he saw his first Japanese soldier.

Ben Salomon was a dentist.  But when he saw the foe attacking the wounded men lying outside his tent, he remembered his training.  He grabbed a gun, fired, and returned to his work.  But then, two more enemy soldiers entered the tent.  Salomon dealt with these, too – only for another four to emerge from beneath the tent walls.  Shouting for help, Salomon rushed them head on.  He defeated three on his own; one of his wounded comrades stopped the fourth.

But the front lines were punctured, and the bleeding couldn’t be stopped.  The enemy was overrunning the foxholes, and the aid station was doomed.  Realizing what was about to happen, Salomon ordered the wounded men to retreat, supporting and carrying each other as necessary.  In the meantime, Salomon said, he would hold the enemy off.

The wounded soldiers staggered out the rear of the tent.  Ben Salomon left by the front.

When they found his body two days later, Salomon was alone, clutching a machine gun.  The bodies of ninety-eight enemy soldiers were in front of him.  He had seventy-six bullet wounds and dozens of bayonet wounds, many of them suffered while he was still alive.  While he was still fighting.

Ben Salomon was a dentist.  He was also a warrior, a patriot, and a hero.

***

Fifty-nine years later, Ben Salomon was posthumously awarded the Medal of Honor.  This often happens with those who have died in battle.  Their names are preserved in records, but entire generations can pass before history gives them their due.

Despite receiving the Medal of Honor, and despite the incredible heroism he displayed, few people have heard of Ben Salomon before.  That’s not a surprise.  After all, over one million men and women have died serving our country.  They were all heroes, yet most can’t be found in history books, documentaries, or even Wikipedia articles.  In a sense, Ben Salomon is fortunate.  The Medal of Honor is given to those who have “distinguished themselves by acts of valor.”  But surely there are tens of thousands of people who never received such a medal even after their death – because their own acts of valor are lost to time.

We think this is one of the reasons we observe Memorial Day every year.  Whenever we visit a cemetery, whenever we flip through a photo album or scrap book, whenever we comb through the stories of our friends, family members, and ancestors who made the ultimate sacrifice, we commemorate the Ben Salomons of the world.  They weren’t superheroes like you see in movies, with magical powers or unworldly strength.  They were teachers and taxi drivers, farmers and factory workers, students and scientists.  They were dentists.  Every Memorial Day, we ensure their memories, their deeds, and their sacrifices are never forgotten, and thus never in vain.  We award them our own personal medals of honor – for deeds that mean so much to the world, and everything to us.

That’s why we observe Memorial Day.  To ensure that, while people die, valor lives on forever.

On behalf of everyone at Hudock Capital Group, we wish you a safe and peaceful Memorial Day.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

Sources

“In Recognition: Posthumous Medal of Honor Recipients,” Military.com, https://www.military.com/memorial-day/in-recognition-posthumous-medal-of-honor-recipients.html

“Salomon, Ben L.,” Congressional Medal of Honor Society, http://www.cmohs.org/recipient-detail/2981/salomon-ben-l.php

“Medal of Honor,” Wikipedia, https://en.wikipedia.org/wiki/Medal_of_Honor

“Ben L. Salomon,” Wikipedia, https://en.wikipedia.org/wiki/Ben_L._Salomon

 

Riverfront May 18, 2020
Downloads: Riverfront-May-18-2020.pdf

National Debt…Let the Market Tell Us When to Worry

Written by RiverFront Investment Group.  Reprinted with permission from RiverFront Investment Group.  Redistribution is prohibited.

Riverfront May 11, 2020
Downloads: Riverfront-May-11-2020.pdf

Being Right or Making Money

Written by RiverFront Investment Group.  Reprinted with permission from RiverFront Investment Group.  Redistribution is prohibited.

Forbes Recognition Letter May 7, 2020
Downloads: Forbes-Recognition-Letter-2020.pdf

As we weather the current environment, we are reminded to focus on what’s important—our
health, our families, our community. At Hudock Capital, we continue to be grateful for the
opportunity to help our clients live the lives that they’ve imagined and have been deploying
dynamic strategies to navigate the present challenges and opportunities.

It is in the spirit of serving our mission that we were delighted to learn that Forbes just released
its 2020 Top Women Wealth Advisors and named our own Barbara Hudock as one of the top
ten Women Wealth Advisors in Pennsylvania! This follows additional recognitions announced
earlier this year by Forbes and Barron’s which place Barbara and our firm among the highest
ranked in the nation.

Of course, Hudock Capital cannot do what we do without our tremendous clients or our
amazing team of dedicated professionals. In that sense, Barbara shares her recognition with
each member of the Hudock Capital family, including you. Thank you for being a part of our
family!

As we celebrate our collective successes, we are reminded how fortunate we are, even in these
uncertain times. We are humbled by our clients’ trust and know that our faith in the future is
well placed. On behalf of each of us at Hudock Capital, we hope that you and your family
remain healthy and safe and thank you for your business and your friendship.

Sincerely yours,

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

Riverfront May 4, 2020
Downloads: Riverfront-May-4-2020.pdf

A Credit Story: The Haves and Have Nots

Written by RiverFront Investment Group.  Reprinted with permission from RiverFront Investment Group.  Redistribution is prohibited.

Riverfront April 27, 2020
Downloads: Riverfront-April-27-2020.pdf

The ‘New Abnormal’…in Four Pictures

Written by RiverFront Investment Group.  Reprinted with permission from RiverFront Investment Group.  Redistribution is prohibited.

Coronavirus Market Recap April 24, 2020
Downloads: Coronavirus-market-recap.pdf

Coronavirus Market Recap

As you probably know, the markets have enjoyed a stellar April.  After hitting a low of 18,591 on March 231, the Dow has climbed over 25% since then.  (As of this writing, the Dow sits at 23,650.2) Technically, that means the brief-but-vicious bear market we endured in March is over.

So, does that mean the recent volatility is over, too?  To answer that, let’s recap what’s been happening in the markets over the last two months and what it all means for us.

February-March: How the coronavirus impacted the markets

Back in late January, when the world caught wind of an emerging outbreak in Wuhan, the immediate concern was how the virus would affect China’s economy.  The markets wobbled a bit during this time, but the hardest hits were still to come.

Within a few weeks, the markets realized that COVID-19 was no mere local epidemic.  This was not a repeat of SARS, but something far bigger.  As the virus spread across the world, concerns grew.  How would a global pandemic affect the global economy?  How would it crimp supply lines and consumer spending?  Would it cause a recession?

This was when the wild swings of early March started dominating the headlines.  But from an investor’s perspective, we still hadn’t hit rock bottom.  As the weeks passed, it became clear that we were experiencing something few had ever seen before.  The pandemic wasn’t just affecting people’s health, or the stock markets.  It was changing our daily lives.  As a result, concern grew again.  How long would this all last?  How many people would get sick?  How many would lose their jobs?

The Dow hit its all-time high on February 12 – the apex of the longest bull market in history.3  Within a month, it had fallen over 20%.3  It was one of the fastest slides in history, with several record-setting point drops.  There were more rough days ahead, but toward the end of March, the tide began to turn.

Late March-April: The markets rise

Between March 23 and April 14, the S&P 500 rose 27%.4  According to some analysts, it’s the biggest 15-day rally in 87 years. 4  The Dow rose even further — to the tune of 29%!4

But while the markets seem to be in recovery, the economy has only gotten worse.  Approximately 22 million people have filed for unemployment in recent weeks, and that number is all but certain to go up.5  Economies all over the world are facing their sharpest downturns since at least the Great Recession.  And while some countries seem to be “flattening the curve,” the number of worldwide cases continues to climb, including here in the United States.

So, that begs the question: If the economy is struggling, why have the markets been doing so well?  Why are stocks not continuing to suffer, too?

There are two main reasons.

The first reason centers around the government’s response.  On March 25, Congress passed the CARES Act, a massive, $2 trillion stimulus package.  Among other things, it provides funds for both the unemployed and for businesses to keep their staff on payroll.  The Federal Reserve, meanwhile, has lowered interest rates to near 0%.6  The Fed has also pledged to buy hundreds of billions in treasury securities and mortgage-backed debt over the coming months in order to stimulate the economy. 6  More relief is in the works, and it will certainly be needed.  But these are important first steps, and they have helped to buoy the markets.

The second reason has to do with how the markets often work.  You see, the economy and the markets are not the same thing.  They’re related, but different — and they don’t always move in concert with each other.  The economy moves based on activity, like production, consumption, and trade.  The markets, on the other hand, move largely on anticipation.  When investors expect something will happen, they make decisions based off that expectation.  So, when the markets plummeted in March, it was based on the expectation that unemployment would rise, consumer spending would fall, and the economy would contract.

All those things have happened.  So why haven’t the markets continued to slide?  Because those developments have already been “priced in.”  The massive swings we saw in March were based on what is happening right now.  By the same token, the stunning climb we’ve seen in recent weeks is based on what investors expect will happen in the future — that the provisions of the CARES Act will kick in, more government stimulus will arrive, and the pandemic will end.

So, does that mean volatility is over?  To put it simply: no, it doesn’t.

Late April-Future

Here’s why.  We mentioned a moment ago that the markets often move based off expectation.  But market volatility is driven by uncertainty.  When investors don’t know what to expect, they tend to get nervous — and the result is a topsy-turvy market.  Right now, there is still a lot of uncertainty.  We are dealing with a pandemic for which there is no playbook.  While we can make educated guesses, no one knows when this pandemic will end.  No one knows whether things will get worse before they get better.  To be frank, no one knows whether the government’s actions will be enough.  Should the headlines take a turn for the worse, we may well see the markets fall again.

Now, this doesn’t mean we are due for another round of wild swings like we saw in March.  Here’s what it does mean.  When the markets were in free-fall, we counseled you to avoid making any drastic decisions.  In fact, better to ignore what the markets were doing altogether then stress over what they were doing day-to-day!

Our advice remains the same.  Just as we stayed calm while the markets were falling, we’ll also stay calm while the markets rise.  Just as it wasn’t time to throw in the towel when things looked black, we’ll also avoid irrational exuberance just because the sun is coming out.  Our team relies on preparation, not predictions.  So, we must remain mentally prepared for more volatility in the weeks ahead.  If the markets recover entirely, and even climb to new heights?  Terrific!  We are well-positioned to take advantage of that.  If not, that’s okay too.  Remember, we are in this for the long term.

So, our advice is to focus on three things: Your family, your health, and your happiness.  Our team will continue to focus on the markets.  As always, we will let you know the minute we feel any changes are necessary.  But in the meantime, we will remain in “watchful waiting” mode.

Of course, if you have any questions or concerns, please feel free to reach out via phone or email.  We are always here to serve you in any way we can.

Stay healthy, stay safe, and have a great rest of the month!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

 

Sources

1 “Dow sheds another 3%,” CNBC, March 23, 2020.  https://www.cnbc.com/2020/03/22/stock-market-futures-open-to-close-news.html

2 “Dow tumbles 600 points as oil’s May contract stages historic plunge,” MarketWatch, April 20, 2020.  https://www.marketwatch.com/story/dow-tumbles-600-points-as-oils-may-contract-stages-historic-plunge-and-wall-st-braces-for-worst-earnings-since-2008-2020-04-20

3 “Dow Highest Closing Records,” The Balance, March 20, 2020.  https://www.thebalance.com/dow-jones-closing-history-top-highs-and-lows-since-1929-3306174

4 “The stock market is acting like a rapid recovery is a slam dunk,” CNN Business, April 16, 2020.  https://www.cnn.com/2020/04/16/investing/stock-market-dow-jones-recession/index.html

5 “22 million Americans have filed for unemployment benefits,” CNN Business, April 16, 2020.  https://www.cnn.com/2020/04/16/economy/unemployment-benefits-coronavirus/index.html

6 “Fed Slashes Rates to Near-Zero and Unveils Sweeping Program to Aid Economy,” The New York Times, March 15, 2020.  https://www.nytimes.com/2020/03/15/business/economy/federal-reserve-coronavirus.html

Riverfront April 20, 2020
Downloads: Riverfront-April-20-2020.pdf

When It Comes to Q1 Earnings, Words Matter

Written by RiverFront Investment Group.  Reprinted with permission from RiverFront Investment Group.  Redistribution is prohibited.

Riverfront April 13, 2020
Downloads: Riverfront-April-13-2020.pdf

Reinvesting in a Rising Market is Like Merging into Traffic…It’s Best to Have a Plan

Written by RiverFront Investment Group.  Reprinted with permission from RiverFront Investment Group.  Redistribution is prohibited.

Riverfront April 6, 2020
Downloads: Riverfront-April-6-2020.pdf

Control What You Can

Written by RiverFront Investment Group.  Reprinted with permission from RiverFront Investment Group.  Redistribution is prohibited.

An Update on the Coronavirus Situation April 3, 2020
Downloads: Breaking-down-the-CARES-Act.pdf

Breaking down the CARES Act

As you know, the coronavirus pandemic has created both a health crisis and an economic crisis.  As of this writing, there are over 160,000 known cases.1  By the time you read this, there will certainly be more – and that number does not reflect those who have been infected but not tested.  The economic cost, meanwhile, has resulted in millions of Americans losing their jobs.  Some economists at the Federal Reserve estimate the unemployment rate could rise as high as 32%!2

To help address both crises, Congress recently passed the Coronavirus Aid, Relief, and Economic Security (CARES) ActIt’s a massive, $2 trillion stimulus package designed to help everything from hospitals, to individuals, to businesses large and small.  Time will tell if it will be enough to blunt the impact of this pandemic, but the fact Congress was able to pass something so significant, so quickly, is a rare feat worth celebrating.

Charles Darwin once said, “It is the long history of humankind that those who learned to collaborate and improvise most effectively have prevailed.”  For many years now, that is not a quote you could usually apply to the United States Congress.  Political partisanship has meant that gridlock usually prevails over collaboration.  Thankfully, both sides of the aisle recently proved the institution still works when people put aside their differences and work together for the common good.

This is major legislation, with benefits for almost every American.  Some of the bill’s provisions are especially important for retirees.  So, to help you understand what the CARES Act does, and how it will impact you, we have prepared a special breakdown.  As we are sending this to all our clients, some information may apply to you, and some may not.  Please read it carefully, and then let us know if you have any questions.

As always, we hope you and your family are staying healthy and safe.  Please let us know if there is anything we can do for you!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

 

Important Provisions of the CARES Act

The CARES Act is designed “to provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.”3  Think of it as a kind of massive care package.  Just as an actual care package is meant to get somebody through a tough time, that’s what the CARES Act is designed to do.  Because so many people have either lost their job, seen their hours cut back, or experienced drastic changes to their daily lives, many Americans must now contend with potential cashflow problems.  The CARES Act contains a number of provisions to help individuals and businesses handle those problems, at least for the short-term.

What follows is a brief overview of the provisions that could affect you and your finances.  Let’s start with:

Direct Payments4

What’s the quickest way to ensure people get the money they need?  Pay them directly.  Perhaps the most newsworthy aspect of this bill is that many taxpayers will receive a one-time direct payment to help them cover expenses.

Here’s a breakdown of how it will work.

Individuals who made up to $75,000 in 2019 will receive $1,200.

Heads of Household (single parents, for example) who made up to $112,500 in 2019 will receive $1,200.

Married couples filing a joint tax return who made up to $150,000 in 2019 will receive $2,400.

On top of this, each taxpayer will receive up to $500 for each child they have under the age of 17.  So, for example, a married couple with two children would receive $3,400.

Note that payments decrease for individuals and married couples with income above their respective thresholds.  Specifically, payments shrink by $5 for every $100 earned above the $75,000/$150,000 limits.  The payments disappear entirely for individuals who made $99,000 or more, and for married couples who made $198,000 or more.

So, when will this money actually arrive?  It’s unclear.  The IRS could start issuing payments sometime in April or May, but an official schedule has not been released.  (The CARES Act itself only mandates that payments be made “as rapidly as possible.”4)  It’s likely that those who filed their 2019 tax returns with direct-deposit information will receive payments first.

If you haven’t filed your tax return for 2019 yet, please let us know.  We would be happy to work with your tax preparer to expedite the process.

Speaking of tax filing…

New Tax Deadlines5

This isn’t technically part of the CARES Act, but we’re going to cover it anyway because it’s important.  Due to the pandemic, IRS has extended this year’s tax-filing and payment deadlines.  Now, taxpayers have until July 15 – up from the standard April 15 – to file their 2019 tax returns.  The deadline to make IRA and Roth IRA contributions is now July 15 as well.

Note that this new deadline applies to everyone, not just those who are sick, under quarantine, or materially affected by the coronavirus in some way.  And if you’ve already filed your return, you should still receive your refund around the same time you would during a typical tax season.

Unemployment4

Let’s get back to the CARES Act.

We said a moment ago that direct payments were the most newsworthy aspect of the bill.  But for the overall economy, the bill’s unemployment provisions are probably the most important.  Unemployment claims rose by 3.28 million between March 15-21.  That’s the highest weekly surge in history.  The previous record?  695,000.6

To help combat this, the CARES Act provides approximately $260 billion in unemployment assistance for those who lose their jobs.  This includes freelancers, independent contractors, and other self-employed workers.  That’s a major change, because under normal circumstances, they can’t apply for unemployment benefits.

Generally, workers who lose their jobs will receive $600 per week for four months, in addition to what their state unemployment program pays.  The CARES Act also adds an additional thirteen months of federal unemployment insurance on top of a person’s state benefits.

If any family members lose their job, please let us know.  We would be happy to answer their questions or provide any assistance we can.

Business Support4

Even those who don’t lose their jobs will still want to keep a close eye on our nation’s unemployment rate.  More people out of work means less people spending money on the economy – which can have a profound influence on the markets.  That’s why one of the most critical things the government can do right now is help businesses avoid laying people off. 

Roughly $350 billion of the legislation’s price tag is geared towards just that.  Companies with up to 500 employees can receive loans of up to $10 million.  Any portion of the loan used to maintain payroll or retain workers – at least through the end of June – will be forgiven.  In addition, businesses can apply for grants of up to $10,000 to cover their operating costs.

For larger businesses, the CARES Act sets aside around $500 billion in loans and grants, especially for hard-hit industries like airlines.  And for companies that are forced to close or furlough workers, the legislation “covers to 50% of payroll on the first $10,000 of compensation, including health benefits, for each employee.”7

These are all necessary steps to keep our economy going.  Will they be enough?  That’s an open question.  The answer largely depends on how long the pandemic lasts – and how well Americans commit to social distancing to stop the virus’ spread.  Watch this space.

Retirement Funds4

We said at the beginning of this message that some of the CARES Act’s provisions are especially important for retirees.  Let’s cover those now.

First up, Required Minimum Distributions, or RMDs.  In a normal year, anyone 72 years or older would need to withdraw a minimum amount from their IRA or 401(k).  Not this year.  Under the CARES Act, all RMDs are suspended in 2020.  That means you can leave that money in your retirement account for the year if you don’t need it now.  Note that this applies both to retirement account owners and beneficiaries.

People who have already taken their distribution for 2020 can potentially return the money to their account if they want.  This could be a slightly complicated process, so we won’t cover it here.  However, if you want further information about it, let us know.

The CARES Act also waives the 10% early withdrawal penalty for retirement accounts.  Withdrawals will still be taxed, but spread over a three-year period.  Under most circumstances, our advice is to leave your retirement savings where they are, but it’s nice to know that early withdrawals are an option if you need them.

Finally, the CARES Act increases the 401(k) loan-limit from $50,000 to $100,000.

If you have questions about any of these provisions, or how they apply to you, let’s chat!

Combatting the Coronavirus4

Finally, it should come as a great comfort to know that the brave doctors, nurses, and scientists on the front lines are getting assistance, too.  Specifically, the CARES Act provides $100 billion for hospitals, $1.32 billion for community health centers, $11 billion for coronavirus treatments and vaccines, $16 billion for additional medical supplies, like ventilators and masks, and $20 billion for veterans’ health care.  You should know, too, that the Act includes a telehealth program so that if you can’t leave home, you can still have a virtual appointment with your doctor.

Our hearts go out to all those giving their time, talents – and sometimes, lives – to keep the rest of us safe.  They are true heroes, and we are so grateful for them.  Let’s all do our part to make their jobs just a little easier by maintaining our distance, keeping clean, and staying home as much as possible.

Conclusion

As you can see, the CARES Act is a loaded piece of legislation.  Time will tell whether more measures are needed, but this is definitely a good start.

Of course, our team will continue poring over these changes.  If there is anything else we feel you need to know, we’ll reach out to you.  In the meantime, if you have any questions about:

• Getting a direct payment
• Filing your taxes
• Protecting your paycheck and/or income
• Your retirement accounts

Please don’t hesitate to let us know.  Whether we’re in the office or working from our own homes, our team is always here for you.

Stay healthy, and stay safe!

 

Sources

1 “Cases in U.S.”, Centers for Disease Control and Prevention, March 31, 2020.  https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html

2 “Coronavirus job losses could total 47 million, unemployment rate may hit 32%, Fed estimates,” CNBC, March 30, 2020.  https://www.cnbc.com/2020/03/30/coronavirus-job-losses-could-total-47-million-unemployment-rate-of-32percent-fed-says.html

3 “Text of S. 3548,” United States Senate, https://www.congress.gov/bill/116th-congress/senate-bill/3548/text

4 “Text of the Coronavirus Aid, Relief, and Economic Security Act,” United States Congress.  https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

5 “New Details From the IRS on July 15 Tax Deadline, Audit Relief,” The Wall Street Journal, March 30, 2020.  https://www.wsj.com/articles/new-details-from-the-irs-on-july-15-tax-deadline-11585087948

6 “Unemployment claims soared to 3.3 million last week, most in history,” CNN Business, March 26, 2020.  https://www.cnn.com/2020/03/26/economy/unemployment-benefits-coronavirus/index.html

7 “What’s Inside the Senate’s $2 Trillion Coronavirus Aid Package,” NPR, March 26, 2020.  https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package

Need Help Adjusting? April 2, 2020
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