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THE WEEK ON WALL STREET: Last week, the Standard & Poor’s 500 dropped 2.86%. The MSCI ACWI Index, a broad measure of equity-market performance throughout the world, also fell 2.06%. Meanwhile, the Barclays Global Bond Index managed to rise 0.16%.

REVISITING RMD SUSPENSIONS WITHIN THE CARES ACT: Because this massive piece of legislation was not ratified until the end of March, many individuals had already taken what they thought were their 2020 required minimum distributions (RMDs). Many of those retirement account owners (perhaps this includes you) and beneficiaries wanted to “undo” those distributions that were no longer required and put them back into their retirement account.

Cue IRS Notice 2020-51, which was released this week. This ruling clarified that you may indeed choose to roll your RMD back into your IRA, which would lower your taxable income for 2020.

*If you took a distribution but would like to roll it back into your IRA, please let us know ahead of the August 31 deadline and we can make that as painless as possible.


FALSE STARTS ON REOPENING CAUSE CONCERN: Increases in coronavirus cases stirred up investor consternation through Friday’s market session with signs increasingly pointing to a chaotic reopening process. The governor of Texas—one of the first states to begin phasing out its lockdowns—announced the state would temporarily halt its reopening process. For part of this, he suspended elective surgeries in some of the state’s biggest counties to free up hospital rooms for new patients, where intensive-care unit capacity was constrained. New infections in both Arizona and Florida also rose to record high levels as of Thursday’s counts.


ECONOMY HAS A LONG WAY TO GO: While it may be tempting to focus on growth figures, levels of activity are better gauges of the economy’s progress toward full recovery. Through that lens, the economy has only just started to recover. While the May jobs report was a welcome surprise, 90% of laid-off workers were still out of a job last month. Likewise, retail sales remained 8% below their pre-recession levels, while industrial production and housing starts were still 15% and 38% lower.

J.P. MORGAN SAYS BANK BALANCE SHEETS MUCH STRONGER THIS TIME AROUND: With scars of the financial crisis still fresh in investors’ minds, the current recession has sparked renewed concerns around the stability of the banking system, specifically regarding bank exposure to collateralized loan obligations (CLOs) backed by risky, leveraged loans. However, there are several reasons why another collapse is unlikely

  • Underlying loan collateral of CLOs accounted for just 5.6% of 2019 GDP, while the residential mortgage market—collateral that backed subprime collateral debt obligations (CDOs) during the last financial crisis—accounted for 73.5% of GDP in 2007.
  • Banks are far better capitalized. Ratios that illustrate a measure of a bank’s ability to absorb credit losses, have improved remarkably following the financial crisis.
  • CLO ownership is largely concentrated amidst the top three U.S. banks that typically hold the most senior, secured AAA tranches. Since 1999, there has not been a single default of a AAA-rated CLO tranche.

The aggressive and swift action from the Fed has provided support to credit markets that was not present in 2008, relieving some of the burden on banks. We recognize that the current recession will present some challenges as defaults move higher in the lower-rated tranches. This will be one of many key areas we will be monitoring as default data gets reported for the remainder of 2020 and into 2021.

2019 A BANNER YEAR FOR GIVING: American individuals, bequests, foundations and corporations gave an estimated $449.64 billion to U.S. charities in 2019, placing it among the highest years ever for charitable giving, according to findings in Giving USA 2020: The Annual Report on Philanthropy for the Year 2019. “The solid growth of giving in 2019 brought total giving close to the record level set in 2017, which means that the past three years are the three highest years on record. ‘Clearly, Americans prioritize generosity as a key part of their lives,’ said Rick Dunham, chair of Giving USA Foundation and founder and CEO of Dunham & Company. Giving increased substantially in 2019, ending the decade on a high note. While it’s too soon to tell what that will mean in the uncharted territory where we find ourselves today, these estimates provide an important baseline for understanding where giving stood at the outset of the current crisis.”

SPEAKING OF PHILANTHROPY: We regularly discuss short-term and long-term charitable giving goals with our clients. In many cases, we build these specific goals into a client’s financial plan. One timely strategy is to open a Donor Advised Fund, or DAF. A DAF is basically a very simple but effective version of a private foundation. While the client is not the owner of the account (an actual gift must occur for a tax benefit to have been received), they oversee recommending and directing where gifts from the account can be made. Once the charity has been verified by the DAF custodian, the donation is made. Another attractive feature is these funds can name beneficiaries, so you can delegate the act of philanthropy to your heirs. We’ve heard from several client families that they actively involve their children in the decision-making process for which charities to gift to from their DAF.

THE BBC MADE PAR A VISIT: One of our partners and advisors here at the firm, George Limbach, was featured alongside his wife, Mimi Limbach, on a BBC Radio story about a charity they co-founded called People Advancing Reintegration – Recycle Works, or PAR Recycle Works for short. Many clients of Compass Ion are familiar with George and Mimi and what they have helped build at PAR, located in the Germantown section of Philadelphia. For those of you who do not know their story and would like to listen, click here: BBC Story about PAR. George lives out Compass Ion’s mission daily, and we as a firm are proud supporters of what they are doing for the lives of so many.