June 30, 2020

The Future Was Thrown At Us

The COVID-19 pandemic will have ripple effects that will be felt for many years to come. It's hard to imagine a world that returns back to levels of normality last seen in 2019 without a vaccine that completely eradicates the disease.

Wearing a mask in public will no longer be met with stares from strangers, more people will have flexibility in terms of working from home, and e-commerce will continue to take market share from physical retail stores.

Amid the COVID-19 pandemic, one thing is for sure: the future was thrown at us.

That is, trends that were in place prior to the global pandemic have now become supercharged with no signs of slowing down, especially given the recent uptick in COVID-19 cases in the US over the past few weeks, which signals that this won't be over anytime soon.

While cases in the Tri-State area continue to tick down, states like Florida and Texas, which both implemented aggressive reopening plans, have seen a surge in new COVID-19 cases.

This reinforces the thinking that until an effective vaccine or therapeutic is developed, the only way to mitigate the spread of the disease is to reduce economic activity.

From an investment standpoint, that means to continue investing in trends that remain in place and are benefiting from the current world we live in, and avoid investing in companies that have been negatively impacted by the virus, but might sport a cheap valuation (airlines, cruise lines, hotels, casinos etc.).

They're cheap for a reason.

We continue to favor US over International and Large Cap companies over Small Cap companies because US Large Cap stocks have the highest allocation to technology stocks.

Technology stocks are earning profits like never before. They have clean balance sheets with little debt and lots of cash, they're growing at a double digit rate on an annual basis (at least), and they're well positioned for long term secular trends like video streaming, 5G connectivity, automation, and cloud computing.

At Ithaca Wealth Management, we are focused on positioning your investment portfolio to be directly invested in companies that will survive, thrive, and come out stronger on the other side of this pandemic.

Companies like...

Adobe, for its software suite that enables parties to quickly sign documents via e-mail and create and edit PDFs.

Microsoft, for its suite of productivity software that allows seamless collaboration between employees even though they're working remotely.

PayPal, for its cashless peer to peer payment platforms like Venmo, which has seen a surge in activity over the past 3 months.

Amazon, for its e-commerce platform and its AWS cloud solution, which powers much of the internet as we know it.

The list goes on.

Reducing downside risk is key to protecting and growing wealth over time. We reduce your downside risk by investing in high quality companies that are poised for growth regardless of a global pandemic.

Case in point, the NASDAQ 100 index is up +10% year-to-date, while the S&P 500 is down 6% year-to-date.

This isn't to say technology stocks will outperform indefinitely. Valuations can get stretched and investors may rotate into lower priced sectors in search of better opportunities. But in the long run, the trends that have supported the growth of tech stocks up until this point are not going away, and will only likely accelerate from here.

To give you a sense of how much room there is for a company like Amazon to grow (3rd largest company in the world), consider this: e-commerce sales made up just 11.8% of all retail sales in Q1 of 2020.

There is always runway for more growth at companies that continue to innovate and adapt to changing environments.

Chart of the Week

Now is as good a time as any to remind you that historically, over time, stocks go higher. Focus on why you're invested rather than the day to day market fluctuations. Studies have shown that the investors who do the best are the ones who forget about their investment account entirely.

Our top priority is to make sure you stay invested through both the good and the bad. Are you worried about the current market environment? If so, reach out to schedule an appointment so we can review your portfolio together.

Your Investments in the News

  • Accenture reported Q3 earnings that beat analyst's revenue and income estimates.
  • Eli Lilly's Verzenio proved successful in preventing the recurrence of late-stage breast cancer.
  • Costco reported same store sales of +9.7% in May, beating analyst estimates.
  • Amazon acquired Zoox, an autonomous ride-hailing car company for $1.2 billion, pitting it directly against Google's self-driving Waymo unit.
  • Merck's cancer drug Keytruda received FDA approval to treat certain forms of skin cancer and colorectal cancer, and the company reported positive trial data in Keytruda's treatment of liver and kidney cancer.
  • Apple announced at its developer's conference that it would transition to computer chips built in house rather than relying on Intel, potentially helping increase profit margins in the long run.
  • McDonald's said it plans to hire 260,000 restaurant employees this summer
  • Adobe reported Q2 earnings that missed analyst's revenue estimate but beat their profits estimate.
  • Starbucks said it doesn't expect sales to bounce back until the fall
  • Disney delayed the theatrical release of its 2020 blockbuster film 'Mulan' for a second time to late August, and delayed the reopening of Disneyland indefinitely
  • The DOJ is investigating Apple for antitrust violations over its App Store policies, as well as Google for its digital ad market operation
  • Washington state and California are investigating Amazon for antitrust concerns related to its 3rd party seller platform
  • Apple re-closed 14 of its physical stores in Florida as COVID-19 cases surge
  • Medical device companies like Stryker, Medtronic, and Intuitive Surgical have been under pressure as some hospitals pause elective surgeries to make room for COVID-19 patients.

Altruist Update: Version 2.0 Release

Changes are coming to Altruist, the underlying technology platform that powers Ithaca Wealth Management.

You will soon receive a letter detailing Altruist's upcoming August transition to APEX Clearing from DriveWealth.

This change to APEX will enable many new features, including the ability to open up new account types like: trusts, educational/529 plans, simple IRA's & 401(k)s, and more. It will also lay the ground work for new capabilities like the ability to set up recurring automatic deposits/withdrawals, and customized account rebalancing options.

Additionally, it will enable a seamless digital ACATS transfer process. This means consolidating and transferring your investments from outside firms to Ithaca Wealth Management will be a painless process.

While these upgrades are welcome, it comes with a brief service disruption to your account:

1. IRA rollovers and check deposits cannot be initiated after July 17 until the transition is complete on August 11.

2. All trading in your account and the ability to deposit/withdrawal cash into/out of your account will be halted from August 4th to August 11th. During this time, your account and investments will be in transfer status from DriveWealth to APEX Clearing.

We apologize for any inconvenience this may cause you. No action is required on your part.

At the end of the day, these growing pains will allow us to offer you new products and services. We will send further communication as the transition from DriveWealth to APEX nears.

Do you know someone you think would benefit from our low-fees, $0 account minimums, and investment management services? We'd love to help them! Reach out to mfox@ithacawealth.com to refer a friend or family member.

What We’re Watching This Week

Biotech Stocks On Verge Of Breaking Out

The index that tracks pharmaceutical and biotech companies has been consolidating sideways for 5 years and is on the verge of making new all time highs. If the index does break higher, this bodes well for the healthcare sector.

COVID-19 Cases Back In The Spotlight

The market has refocused its attention on COVID-19 as some states have rolled back their reopening plans due to a surge in cases. One positive note (for now at least): daily fatalities in the US ex Tri-State area has yet to rise with daily new cases.

The 3,000 Level On The S&P 500

The S&P 500 continues to flirt with a key support level: 3,000. Investors should be prepared for downside in the stock market if the S&P decisively moves below 3,000. At the same time, don't be surprised if we see more upside if 3,000 holds as support, as it did on June 29th. June 26th, June 15th, June 12th, and June 11th.

Best Time Ever To Refinance Your Mortgage? Right Now!

Interest rates continue to fall, and the 30-yr fixed mortgage rate dipped to a record low 3.13% last week. If you're in the market for a house or thinking about refinancing your current mortgage, now is a good time to do so. The typical rule of thumb is if the current mortgage rate of 3.13% is a full 1% below your rate, it may make sense to refinance.

Finally, Tulip Fields In Holland

Have a great week and a happy 4th of July celebration!

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