McKee Financial

9-7-2020 Newsletter: Retirement Is a Beginning

We decided to add a new section to our newsletter, one that highlights notable dates coming up.  Who knows, it might inspire someone to allow the kids to take over the kitchen on September 13th, one to speak like a pirate on September 19th, or be a little more mindful of ones punctuation on the 24th of this month. 

The month of September was originally the seventh month of the Roman calendar.  It came from the Latin word septem, meaning “seven”. 



The Bull Is Back... Will It Keep Charging?

On August 18, 2020, the S&P 500 set a record high for the first time since COVID-19 ushered in a bear market on February 19. The cycle from peak to peak was just 126 trading days, the fastest recovery in the history of the index — erasing losses from an equally historic plunge of almost 34% in February and March.1

Based on the traditional definition of market cycles, the new record confirms that a bull market began on March 23 when the index closed at its official low point. This also confirms that the February–March bear market was the shortest on record, lasting just 33 days.2

Although the strong comeback is good news for investors, there is a striking disconnect between the buoyant market and an economy still struggling with high unemployment and a public health crisis. The market is not the economy, but the economy certainly affects the market. So it may seem puzzling that the market could reach a record high not long after the largest quarterly decline in gross domestic product (GDP) in U.S. history.3

Optimism vs. Exuberance

Whereas GDP measures current economic activity, the stock market is forward looking. The rapid bounceback suggests that investors believe the pandemic will be controlled in the not-too-distant future and that business activity will return to normal. Whether this optimism is warranted remains to be seen. The current economic situation remains tenuous, but there are hopeful signs.

A vaccine could be available in early 2021, later than anticipated but offering light at the end of the tunnel.4 In the meantime, the virus continues to suppress business activity. The 10.2% July unemployment rate represented a big improvement over the previous three months, but it was still higher than at any time during the Great Recession.5 Recent projections of corporate earnings suggest they will not contract as much as expected, but they will still contract.6 GDP is projected to make up ground in the third and fourth quarters but remain negative for the year.7

The extreme of market optimism is irrational exuberance, and there may be some of that at work in the current situation. The proliferation of low-cost trading apps has encouraged less-experienced investors to trade aggressively, which might be driving some of the market surge.8


Economic Stimulus

The single, most important factor behind the market recovery is the deep commitment from the Federal Reserve to provide unlimited support through low interest rates and bond-buying programs. For some investors, the fact that the economy is still struggling has a strangely positive effect in guaranteeing that the Fed will keep the money flowing.9

Further support from the federal government is more uncertain, but the strong market suggests that investors may be counting on a second stimulus package.10


Nowhere Else to Go

Low interest rates make it easier for businesses and individuals to borrow, but they have reduced bond yields to the point that many investors are willing to take on greater risk in equities in order to generate income. Money that might normally be invested in the bond market has poured into stocks, driving prices higher. This situation has its own acronym: TINA — There Is No Alternative to Stocks.11


Big Tech at the Wheel

While the S&P 500 is generally considered representative of the U.S. stock market as a whole, the recovery has centered around technology companies, which have helped provide goods and services throughout the pandemic. The Big Six tech stocks — Apple, Facebook, Amazon, Netflix, Microsoft, and Alphabet (Google’s parent) — were up collectively by more than 43% for the year through August 18. By contrast, the rest of the companies in the S&P 500 were down collectively by about 4%. The Big Six tech companies now represent more than one-fourth of the total market capitalization of the S&P 500 and thus have an outsized effect on index performance.12

One question facing investors is whether to chase the winners or look to stocks and sectors that still lag their previous highs and may have greater growth potential. Chasing performance is seldom a good idea, but there are solid reasons why certain stocks have been so successful in the current environment.


Are Stocks Overvalued?

The most common measure of stock value is price/earnings (P/E) ratio, which represents the stock price divided by corporate earnings over the previous 12 months or by projected earnings over the next 12 months. The projected P/E ratio for the S&P 500 on August 18 was 22.6, the highest since March 2000 at the peak of the dot-com bubble. Big tech stocks were even higher, trading at 26 times their projected earnings, and the Big Six were higher still at more than 40 times projected earnings.13–14

A different measure of stock value compares the total market capitalization of all U.S. stocks with GDP. By this measure, the market was 77.6% overvalued on August 18, by far the highest valuation ever recorded. The previous highs were 49.3% in January 2018 and 49.0% in March 2000. This extreme ratio illustrates the current disconnect between the stock market and GDP, but a significant GDP increase during the third quarter could bring it down.15

In considering these valuations, keep in mind that these are extraordinary times, and traditional expectations and measures of value may not tell the whole story. If nothing else, the extreme volatility and rapid market cycles of 2020 have illustrated the importance of maintaining a diversified all-weather portfolio and the danger of overreacting to market movements. While new records are exciting, they are only signposts along the road to achieving your long-term goals.

The return and principal value of stocks and bonds fluctuate with changes in market conditions. Shares, when sold, and bonds redeemed prior to maturity may be worth more or less than their original cost. Investments seeking to achieve higher yields also involve a higher degree of risk. Diversification is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss. The performance of an unmanaged index such as the S&P 500 is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary.

1, 3, 6, 8, 11, 13) The Wall Street Journal, August 18, 2020
2) CNBC, August 18, 2020
4, 9) The New York Times, August 18, 2020
5) U.S. Bureau of Labor Statistics, 2020
7) The Wall Street Journal Economic Forecasting Survey, August 2020
10) CNBC, August 14, 2020
12, 14) The Washington Post, August 20, 2020
15) Forbes, August 18, 2020

This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2020 Broadridge Investor Communication Solutions, Inc.


Interesting Economic Facts

Sleep deprivation costs the US economy billions of dollars: $411 billion, or 2.28% of the GDP annually based on RAND estimates.



NAFTA and automobiles: The average car part crosses into Mexico and Canada eight times in production



The United States is not the richest country in the world.

Despite having the world’s biggest economy, the United States is not the richest country in the world per capita. The U.S. only ranks at the 10th place, leaving Qatar as the richest country on the planet with $130,475 GDP per capita compared to the U.S. with only $65,000.



The "economy" of Warren Buffet is bigger than most country's economies.

Warren Buffet runs Berkshire Hataway, a business with a market capitalization of over $415 billion. For reference, a growing country like the Philippines only has a GDP of $375 billion.


...and for the History Lovers... This Week in History


September 7, 1888

An incubator is used for the first time on a premature infant.


September 8, 1504

Michelangelo's 13-foot marble statue of David is unveiled in Florence, Italy.


September 9, 1776

The term "United States" is adopted by the Continental Congress to be used instead of the "United Colonies."


September 10, 2008

The Large Hadron Collider, the world's largest and most powerful particle accelerator—described as the biggest scientific experiment in history—is powered up in Geneva, Switzerland.


September 11, 1962

Thurgood Marshall is appointed a judge of the 2nd Circuit Court of Appeals.


September 12, 1992

Space Shuttle Endeavor takes off on NASA's 50th shuttle mission; its crew includes the first African-American woman in space, the first married couple, and the first Japanese citizen to fly in a US spacecraft.


September 13, 1788

The Constitutional Convention authorizes the first federal election resolving that electors in all the states will be appointed on January 7, 1789.

The McKee Financial Resources Inc. Website

This twenty-two page flipbook will help you understand America’s Retirement Safety Net.  This is in no way a comprehensive guide, but more of an overview. 

Understanding Social Security and Medicare

America’s Retirement Safety Net, Understanding Social Security and Medicare.



Notable Dates in September


  • September is National Happy Cat Month


  • September 7—the first Monday in September—is Labor Day. Canadians also observe Labour Day.


  • September 8: National Hug Your Hound Day


  • September 11 is Patriot Day, held in honor and remembrance of those who died in the September 11 attacks of 2001.


  • September 13 is Grandparents Day. Honor your grandparents today—and every day!


  • September 13: Kids Take Over the Kitchen Day


  • September 17 is Constitution Day. This day celebrates the adoption of the U.S. Constitution, which occurred on September 17, 1787 (just five years prior to the founding of The Old Farmer’s Almanac, believe it or not!).


  • September 18 brings the start of Rosh Hashanah, at sundown. 


  • September 19: International Talk Like a Pirate Day


  • September 21 is recognized as the annual International Day of Peace. Observances range from a moment of silence at noon to events such as peace walks, concerts, and volunteering in the community.


  • September 22 marks the start of fall! This year’s Autumnal Equinox falls on September 22 at 9:31 A.M. EDT. At this time, there are approximately equal hours of daylight and darkness.


  • September 24: National Punctuation Day


  • September 27 is Yom Kippur, the holiest holiday in the Jewish calendar.


  • September 29 is Michaelmas. Michaelmas is an ancient Celtic “Quarter Day” which marked the end of the harvesting season and was steeped in folklore.



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