Fortis Wealth Management

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August 2021
Market Update
(all values as of 05.31.2024)

Stock Indices:

Dow Jones 38,686
S&P 500 5,277
Nasdaq 16,735

Bond Sector Yields:

2 Yr Treasury 4.89%
10 Yr Treasury 4.51%
10 Yr Municipal 3.11%
High Yield 7.84%

YTD Market Returns:

Dow Jones 2.64%
S&P 500 10.64%
Nasdaq 11.48%
MSCI-Europe 6.25%
MSCI-Pacific 3.57%
MSCI-Emg Mkt 2.46%
US Agg Bond -1.64%
US Corp Bond -1.12%
US Gov’t Bond -1.53%

Commodity Prices:

Gold 2,347
Silver 30.55
Oil (WTI) 77.16


Dollar / Euro 1.08
Dollar / Pound 1.27
Yen / Dollar 156.92
Canadian /Dollar 0.72

Macro Overview

An increase in confirmed Delta variant COVID cases globally reignited concerns about implementation of quarantines and social distancing restrictions. The rise in newly verified cases come as European countries start to relax restrictions that had been in place for the past year. In the United States, renewed mandates by the Centers For Disease Control & Prevention (CDC) are being criticized by some and welcome by others.

Economists believe that much of the economic growth thus far in 2021 has been attributed to business reopenings and government-provided financial assistance. Recent concerns about future economic growth include reinstated COVID-related restrictions, along with possible shutdowns for certain areas. Numerous employers and government agencies are starting to require that employees be vaccinated before returning to work.

Sequencing data is used determine how infectious mutations of Covid-19 are and what precautions to take. The complex automated process breaks down the DNA structure of an organism, revealing how to mitigate its exposure and neutralize it. Pharmaceutical companies employ this process to develop booster shots for existing vaccines.

As of the end of July, roughly 50% of the American population had been fully vaccinated as reported by the CDC, comprising over 163 million people. The CDC maintains that a fully vaccinated population may help limit the destructiveness of a probable wave of Delta infections. Federal Reserve member Mary Daly stated that the spread of the Delta variant along with low vaccination rates in certain regions of the world pose a threat to the global recovery. She also voiced caution in curtailing stimulus efforts for the U.S. economy.

Data for the U.S. Census Bureau revealed that 15% of people in renter-occupied housing are behind on their rental payments, double pre-pandemic levels. A federal moratorium on evictions expired July 31st and a new moratorium with limited scope was issued through October 3rd.

Arabica coffee beans, the benchmark for the price of coffee worldwide, had its largest price drop since 2008 as supply limitations diminished. Turbulent weather in Brazil and export issues in Columbia and Vietnam drove prices higher toward the middle of 2020. The U.S. Department of Agriculture (USDA) expects lower coffee prices along with an increase in coffee consumption this year.

Sources: Census Bureau, USDA, Fed, EIA, U.N., CDC

Census projections show that 65 year olds will out number 18 year olds by 2035

Stocks Advanced Cautiously In July – Domestic Equity Overview

Concerns about the Delta variant and a rapid rise in infections drove equity volatility higher as economic projections and earnings growth estimates were reevaluated. Equity markets were generally resilient to renewed restriction mandates in July.

Analysts are cautious regarding continued earnings growth in certain industries as renewed restrictions imposed by local, state, and federal government agencies, as well as by private companies, may inhibit recent progress made in sectors including travel, leisure, and restaurants. Regardless, major equity indices traded higher in July as recovery expectations and post-pandemic momentum fueled the market, with the S&P 500 up 2.2% for the month. (Sources: Bloomberg, Reuters)

Rates Pulled Back In July – Fixed Income Overview

Treasury bond yields fell as markets reacted to increasing infections globally. The 10-year Treasury bond yield closed at 1.24% on July 31st, down from 1.45% at the end of June.

The Federal Reserve voiced concerns regarding how surge in Delta variant cases may impact economic activity. Monetary policy support that has been in place since early 2020 will not be withdrawn until “substantial further progress” is made, the Fed announced. The Fed is holding off on plans to begin indirectly raising interest rates until conditions improve. (Sources: U.S. Treasury, Federal Reserve)

65-Year Olds Projected To Exceed 18-Year Olds – Domestic Demographics

Demographics and population data are carefully tracked by the Census Bureau in order to determine what the United States may look like in the future.

Minors under 18 years of age in the U.S., of whom there are over 73 million, currently outnumber the 46 million Americans who are 65 and over. Younger citizens typically spur economic growth with consumer demand and provide essential workers for the labor market. The demographical make-up of the country was driven by the baby boom generation for decades. Those born between 1946 – 1964 shaped the economic makeup of the country while providing economic growth and skilled workers. The first wave of baby boomers reached 65 years of age in 2011, initiating a massive shift of individuals from working status to retirement status.

The Census Bureau estimates that by 2035, those age 65 and older will begin to outnumber those 18 years old and under. The number of 65-year olds and above will rise much faster than those 18 and younger, creating a strain on the U.S. job market. By 2050, it is estimated that there will be nearly 90 million Americans aged 65 and older. The shrinking pool of minors will eventually lead to lower population growth and potentially lower economic growth. A growing elderly population is expected to impact already-strained Medicare and Social Security benefits.  (Source: U.S. Census Bureau)

2021 tax credit is $3,600 for each child under age 6 & $3,000 for each child ages 6-17

Tax Repercussions Of The Child Tax Credit – Tax Planning

In the past month, around mid-July, millions of Americans received a tax credit deposit to their bank accounts. This government payment was part of the federal pandemic relief program that allocated billions of dollars to eligible families with children.

In March of this year, Congress expanded the child tax credit to $3,600 per child for the year, from $2,000. The increased credit was a response to the financial fallout of the pandemic, in order to assist families nationwide across several income brackets. The IRS made the first of six monthly payments in July to eligible families.

The tax credits are based on the most recent tax return filed, so if 2020 hadn’t been filed yet then payments were based on 2019 tax returns. There is an income phase out at $75,000 for single filers and $150,000 for most married filers. Above these income limits, the tax credit reduces by $50 for every $1000 of additional income.

If actual 2020 income for a family was higher than the tax return used by the IRS to calculate payments, the family may encounter tax implications once the updated tax returns are filed. So if income is higher in 2020 than in 2019, the IRS used the 2019 return to determine the amount of the tax credit, then taxes may be owed to account for overpayment.

The maximum tax credit for 2021 is $3,600 for each child under age 6 and $3,000 for each child ages 6-17 through December 31, 2021. Half of the total credit amount will be paid in advance monthly payments starting July 15, 2021 and the other half will be credited when 2021 income tax returns are filed. In order to avoid a possible tax consequence from the advance payments, the IRS is allowing taxpayers to un-enroll from the advance monthly payments. The IRS link to un-enroll is (Sources: IRS, TaxPolicyCenter)

CD Rate History – Historical Note

Certificates of Deposits (CDs) used to serve as a viable source of income for retirees and conservative savings asset for working individuals. However, with persistent ultra-low nominal interest rates that often translate to negative real rates given inflation, the viability of CDs for purposes of investing has been severely limited.

A CD comes with notable liquidity constraints. Banks restrict access to the funds until the maturity date of the investment and impose penalties for early withdrawals.

Data compiled by both the FDIC and the Federal Reserve over the decades has carefully tracked CD rates offered by banks nationwide. The average 3-month CD as of this past month has a rate of 0.09%, a fraction of a comparable 3-month CD in 1983.

It’s difficult to offset inflation with current CD rates. When a 3-month CD paid 13.78% in 1979, the inflation rate of 13.3% that same year translated into earning half a percentage point difference in real terms net of inflation. The challenge today, even with low inflation relative to 1979, is that the average 3, 6, and 12-month CD rates are below the current rate of inflation. (Source: Federal Reserve Bank of St. Louis)

2021 estate tax exclusion is $23.4 million (per married couple)

Benefits Of A Trust Versus A Will – Estate Planning

A properly drafted will or trust is essential for anyone who has assets to leave to heirs. Either a will or a trust allows you to designate anyone you wish as beneficiaries. Both a will and a “revocable living trust” allow you to identify who the heirs to your assets will be.

The main difference between the two is that assets held in a trust will avoid probate, which can often be time-consuming and costly. A trust structured as a revocable living trust can help shelter family assets from taxes by properly placing assets within the trust. For 2021, the first $11.7 million (per individual) $23.4 million (per married couple) is excluded from estate taxes, with any assets over that amount taxed at the Federal Estate Tax Rate.

If you own property in another state, a living trust eliminates the need to probate that property in that state. A living trust can immediately transfer management of your property if you become incapacitated either physically or mentally. There is no need to go to court to appoint a guardian or conservator.

If you choose to create a living trust, a pour-over will may also be appropriate. It provides for the distribution of any property that is not included in the trust. It will also allow you to name a guardian for any minor children. (Source: IRS)


Stress Induced By The Pandemic Creates Health Concerns – Health Awareness

Nearly a year-and-a-half since the WHO declared COVID-19 a global pandemic, millions of Americans are experiencing ongoing health effects as a result of stay-at-home restrictions, lack of social interaction, and deteriorated eating habits.

The American Psychological Association released a report detailing some of the ill health effects brought about by the pandemic. Prolonged stress experienced by adults led to mental and physical impairments including weight changes, disrupted sleep patterns, and increased alcohol use.

Weight change is common among those coping with mental health challenges. Over 60% of surveyed adults experienced undesired weight changes, either an increase or decrease.

Many people also postponed or canceled health care services including doctor visits and regular health screenings. Nearly half of those surveyed said their level of stress increased since before the pandemic. Essential workers were more prone to stress than those who were able to work from home. More than half of the essential workers surveyed said they relied on unhealthy habits to get through the strains of the pandemic.

The report also found that roughly half of those surveyed are hesitant about the future, regardless if they’re vaccinated or not. (Source: American Psychological Association; Stress In America-One Year Later)