Well, aren't we all glad that is behind us?

Maybe not.

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     As we move through the month of October it became quite clear why October is listed as one of the most volatile months of a calendar year. The second week of October showed some great strength and moved noticeably higher, but weakness set in and for the final 20 days of the month, the market just showed no strength at all.


     As you can see in the graph below, at one point during the month the S&P 500 Index was up just over 5%. But as stated above over the next 20 days the lack of strength in the market allowed it to drop very noticeably and October ended the month down about -2.5%. I think it's also essential to bear in mind that during the month of September the S&P 500 Index, dropped approximately -4%. This, for the second time this year, has erased all the gains the S&P 500 Index had for the year as you can see in the second graph below. The first time this happened was in late February and the market has been struggling to get back to positive territory ever since. 

 The S&P 500 for the month of October. Results? A -2.5% return. 

This shows the last 90 days of the S&P Index during this period known as the most volatile 90 days of the market annually. Results? A small loss.

     As we look back over all the upheavals of 2020, it is important to keep in mind that investing has risks and hopefully it has rewards as well.  Risks can be and are promised but rewards, well not so much! But, where are we today and what may lie ahead?
For the full year, stocks, in general, have barely shown any gains. Results? Less than 2% in growth for the S&P yet U.S. Government Bonds and Gold have risen nicely.


November starts off a new month for the market to attempt to trudge higher. End-of-year (Santa Claus rally in December) rallies are not uncommon so hopefully, some strengths of the market will begin to show up and redeem those investors who are simply buying and holding.

     Stocks have sort of been somewhat "range-bound" lately meaning they are moving up and down finding it hard to move higher above a certain range but also not breaking below a certain range either. July was the last month where the market began an extended trajectory higher but that seemed to have ended in late August.  Now markets are wanting to press higher but have not found the strength to do so.  With the market's worst 90 historical cycle behind us, maybe breaking higher and out of the range will come to pass.


     In order for any strength showing up for the market to really take hold and push us into a nice rally through the end of the year, there has to be some currently unknown good news to come to the market. What would cause that to happen?

     A vaccine for Covid would be a huge help. This would not cure everything overnight but it would let stocks know, the end is nye.

     More financial stimulus could help in the short term but only for so long and many people, as well as companies, are already in a hole of varying depths so it is not the long-term solution.

     Housing? Well, the housing market seems to be on fire, but maybe this is a bit of a mirage. If we look, especially from the starter home price range and all the way up to and slightly beyond the $1MM price range we see one thing occurring.  Newly permitted home starts and existing home sales are happening in great numbers but not anywhere close to 2006 & 2007 numbers. We are still a long way away from those figures but still, this part of the housing market appears strong! 

     Housing may not be enough though to push the stock indexes higher. As one moves higher in the price range of homes, sales have fallen way back and price estimates have diminished a great deal.  In NYC, for sale home inventory has skyrocketed 37% and prices a month ago were only up 1.1% and the expectation was only for a .2% increase each month for the coming months and a 1% decline overall for the next 12 months. In a recent month, Manhattan only had 2 luxury homes go under contract while a full year earlier, there were 27 luxury homes under contract. We talk about the NYC market because it can often lead the national housing trend higher or lower and currently it seems to be heading lower.

     Since we are still technically in a recession, keeping a watchful eye on trends turning and running against stocks is an important thing to be aware of. We currently have 2.3 million homeowners more than 90 days past due on their mortgage payments.  Many of these would be in foreclosure proceedings but foreclosure moratoriums are still in place in many jurisdictions.  When the moratoriums are lifted, we are likely to begin to see a flood of foreclosures.  Many mortgage companies do not want to be late to the foreclosure filing since the longer they wait the less they tend to get as housing prices fall faster and faster. Housing may not be in a position to rescue the economy though with the low rates we have, it might not be a big drag unless foreclosures ramp higher.

     Travel and hospitality may not be in a position to help much either and could actually be another source of drag on the economy.  The CDC has just approved cruise ships to get under sail again! The problem is, they cannot carry passengers when they do sail! (I wonder how ticket sales are going on those ships?).

     Now that corporations have somewhat figured out how to drive sales without face to face, in person meetings, will corporate flying (the backbone of cash flow for airlines), ever return to its previous levels?

     Also, for the first time in its corporate history of more than 4 decades, Southwest Airlines has announced that it will have its first layoffs ever.  Another sign of too few passengers on flights and the costs of keeping an airline open every day is simply taking its toll on Southwest. Other airlines have already announced and been forcing furloughs.  So, not only is this no help to the economy but it will become a drag on the economy since layoffs will affect cash flows at home for so many.

     Corporate earnings may not provide any strength to the markets either. Many of you may not track the individual corporate earnings cycle as much as we might do here but it's been really interesting that many so-called earnings estimates are actually lower than what's really been actually reported. Could the earnings cycle guesstimators be that low that often? The problem with viewing it that way is many times the earnings expectations have only been set a few days or weeks before the earnings actually come out. They are then called "revised earnings estimates", meaning they were changed in a very recent time frame and so it helps some companies look much much better (They beat their analyst's estimates or so it seems...) than they are actually doing when it comes to profits. It is a bit like watching a horse race and then late in the race picking the horse you think is going to win. You can pick your horse anytime you want but the ability to register your pick ends as soon as the starting gun is fired! It seems Wall Street analysts may not like to play the way the horse racing business plays.




     We don't see housing bailing out the economy. The over-slumped travel and hospitality industry does not seem to be in a position currently to bail out the economy. Corporate earnings certainly don't seem to be on the rise showing that the economy is on the mend. Already across the board in Europe and beyond, Covid cases are rising precipitously and this portends that U.S. trade with some of our largest trading partners may be on the near term decline and return slowly going forward after that.

     Please let us know if you are interested in having an online appointment with us rather than doing a face-to-face meeting.  We have been doing online meetings with clients long before Covid showed up.  We do reviews, updates, or introductory meetings online if you would like for us too.


We remain watchful. 


Ken Graves, Chief Investment Officer

Capital Research Advisors, LLC 

Capital Research Advisors, LLC, 
4185 B Silver Peak Parkway, 
Suwanee, GA 30024 
800 -767- 5364 
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If it seems to you that lately, my comments here about mortgage rates dropping so much are "over the top", you might be right. As this newsletter was being prepped and I compared the current mortgage rates to what they were just a year ago, I was again dumbfounded by how inexpensive it is today to borrow money to buy real estate! 

They will go lower still.

It’s another case of what you don’t know can hurt you, or at least take you by surprise.
     Fifty-five percent of Americans who have been working remotely during the coronavirus pandemic were unaware that a failure to change their state tax withholding to reflect their remote work situation could result in tax consequences, according to a new survey commissioned by the American Institute of CPAs.

     The survey* showed that among the 58% of Americans who are currently employed, 42% have worked remotely since March, and 25% are still doing so.

     “Working remotely can have tax implications that vary from state to state,” AICPA’s director for tax policy advocacy Eileen Sherr said in a statement.

     “The sudden and unplanned increase of many employees working remotely due to the pandemic has left many of them unaware of their current state tax liabilities and any additional steps they need to take now and at tax filing time.”
     *The Harris Poll conducted the survey between Oct. 6 and Oct. 8 among 2,053 U.S. adults.

     The survey also found that 47% of those who have worked remotely during the pandemic were not aware that each state has its own tax laws related to remote working.

     In addition, 71% were not aware that working remotely in other states can affect the amount of state taxes owed. And 54% did not know that the number of days worked out of the state where their physical workplace is located may also affect the amount of state taxes owed.

     When researchers asked respondents whether their state had state income tax reciprocity with any other state, 42% said they were unsure.

     AICPA noted that among those currently working remotely who had worked in a state other than where their pre-pandemic physical workplace was located, many had done so across three states, on average, for relatively short periods of time.

     Seventy-five percent of these remote workers had worked out of state for 60 days or less, and 51% had done so for fewer than 30 days total, AICPA said.
The survey also provided some optimistic results. Two-thirds of those who have worked out of state said they had notified their employer of the state they were working in.

     Fifty-one percent reported that they had tracked the number of days worked in each state, and 41% said they had changed their state income tax withholding.

     Sherr said many remote workers had not taken action, likely because they were not aware they should. “Failure to take these steps could mean an unpleasant surprise at tax time in 2021. Remote workers should take steps now to track their remote work and try to educate and prepare themselves for what the upcoming tax season might mean for them.”

Actions Remote Workers Can Take
     AICPA offered several recommendations remote workers can take to prepare for the 2021 tax filing season:

•    Compile a list of any states you’ve worked remotely in during 2020.

•    If you didn’t track the number of days worked in other states, try to approximate the number of days worked in each state.

•    Depending on the state, income taxes may also be levied by cities, counties, municipalities, school districts, or other jurisdictions. Make sure you also track this level of detail.

•    Consult a CPA for questions about how and where to file state taxes.

•    Make any changes needed to your state tax withholding. Incorrect state tax withholding may result in state taxes, interest, and penalties when you file your taxes.

•    Going forward, continue to keep a record of all jurisdictions you work remotely in.

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This report/summary is to be considered general in nature, reflects our opinions and is based on our best judgment at the time of writing. All information is deemed to be from reliable sources but we cannot guarantee its accuracy. No warranties are given or implied as to their promise of occurrence in the future or their accuracy. It is the readers’ responsibility to decide if any of our opinions are suitable for their own individual situation, and in what manner to use the information. No specific decisions should be made based on this report. These opinions should not be construed as a solicitation for any service. Past performance does not guarantee future results. The opinions expressed in this piece are those of the author and do not necessarily reflect the opinions of Ceros Financial Services, Inc.

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All the information in our newsletter is believed to be reliable and much of it is based on the proprietary research of Capital Research Advisors, LLC itself. However, because of the volume of information we review and the frequency with which it changes the information can only be provided as is on a best efforts basis. The information is not intended to be actionable investment research and therefore should not be used as such. Sources for this information include, but are not limited to, CBS MarketWatch, Big Charts, Bloomberg, Streetscape, Money/CNN, Futuresource, Stock Chart, Yahoo Finance, AmiBroker and

Capital Research Advisors, LLC,
4185 B Silver Peak Parkway,
Suwanee, GA 30024
800 -767- 5364
All rights reserved

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