Client Newsletter 3Q20

Dear Ambassador Family,

What a whirlwind 2020 turned out to be.

We just experienced a six-month sprint through a global pandemic, new laws, record-breaking unemployment, the loss of loved ones, and the disruption of everyone’s personal and professional lives. (For a quick recap of 2020, read through the box on the below.)

Six months of absolute crazy. It felt like forever. And, unfortunately, the ride is far from over.


What we predicted.

There is still much uncertainty. Back in March, we predicted:

  • Coronavirus quarantines would put economic activity on hold for much of the spring, or longer.
  • Low oil prices would pressure US energy producers for months to come.
  • Earnings would likely decline in 2020.
  • Persistently stubborn high unemployment


What have we been doing?

The Ambassador team is very grateful for your trust and partnership. We take our job extremely seriously and want to remind you of what we’ve done.

Towards the end of 2019, we took a lot of risk off the table. A lot of our clients were well-positioned going into the coronavirus recession.

In April, we started to see opportunities in the market and signs of a new economy emerging. We have designed a sleeve to fit these new trends, which has been added to most of your portfolios. This new model takes advantage of companies who are benefiting from: employees working remotely, technological and cybersecurity advances, online payments and shopping, pharmacy and biotech renewals, and vaccine development.

While this has been working for our clients, there are still a few potential risks that we’re facing going into the second half of this year.

  • Resurfacing of Coronavirus
  • Earnings impacted from the shutdowns
  • International uncertainty (especially trades with China)
  • Federal reserve stimulating the economy
  • November Elections of 2020

We have been communicating often and extensively with you. I want to make sure you understand what is happening. If you have not read our previous newsletters, please take the time to do so. We have talked a lot about the uncertainty around COVID-19 and its impact on you.


2020 Recap:

  • January 1st – the SECURE Act was signed into law.
  • From February 24-28 – largest one week decline in the stock market since 2008.
  • March 13th – National emergency declared.
  • March 20th – Treasury Department & IRS announced federal tax filing and IRA contributions deadlines are extended through July 15th.
  • March 23rd – CARES Act signed into law. Waived RMDs for 2020, created coronavirus-relation distributions, & expanded company plan loan rules.
  • June 19th – IRS releases Notice 2020-50—expanding the guidelines for CARES Act.
  • June 21st – IRA releases Notice 2020-51—clarifying rules for RMDs in 2020.


Online Portal

Are you taking full advantage of your online portal? It’s a special tool you have access to. Some features include:

  • You can link outside assets/liabilities – view all of your finances in one easy-to-use platform
  • Personal Planning Tools
  • Various reports on your AWM accounts
  • Info gathering tools for Financial Planning
  • Vault – locate your AWM reports, upload documents you wish to share, and your private documents folder

If you need assistance accessing your online portal, please reach out to Debbie.



This is a big one. There have been so many changes since December 2019. Many of them are still being updated and clarified with new rules and laws, often if not daily.

Retirement account rules and exceptions are very complicated. With many changes, we encourage all of you to check with us before you make any decisions. I don’t want you to find yourself dealing with tax consequences. In other words, don’t do it yourself.

Things are still changing, being interpreted, and worked on. We encourage you to be careful in decisions you make or have us research on your behalf to see if there is a tax-advantageous way to do it.


SECURE Act: What to know

  1. Traditional IRA contributions – 70½ age limit eliminated. If you’re working, you can contribute regardless of age. If you have earned compensation, contributions and/or back door conversions might be a good option.
  2. RMD age increased to 72.
  3. QCD available at age 70½.
  4. New exceptions for birth or adoption – 10% penalty waived for up to $5k from retirement accounts.
  5. Foster care workers can now make retirement contributions.
  6. More annuity options in employer plans will be available starting in 2020.
  7. Stretch IRA eliminated – replaced with 10-year rule for the majority of beneficiaries.
  8. Impact on trusts – many trusts will no longer work as planned and will need to be reviewed.


Investment Update

Currently, we are neutral to slightly cautious with risk.  While we are favorable on liquidity and market technicals, we are quite concerned about valuation and see risks stemming from an uneven pace of economic recovery and an adverse November election outcome.

  1. Economic fundamentals are improving but fragile. On the plus side, housing benefits from low rates and limited inventory.  Technology continues to be a strong secular theme as companies looking to grow and contain costs are likely to replace labor with capital.  Banks have much stronger capital than the previous recession, but they might face stronger economic headwinds from low rates and rising bad loans.
  2. On the negative side, many companies have lots of debt and little visibility into the top line (at least for 2020). Unemployment is improving but remains stubbornly high.  Government stimulus might be peaking.  While the Federal government expands its programs, states and local municipalities face huge revenue shortfalls.  They will still have to cut back on spending.  Net exports are a mixed bag as the rest of the world also suffers from the hangover of the COVID downturn.
  3. Potential exists for near-term improvements with lockdowns winding down, but the risk of a second wave of COVID and corporate layoffs might make it an uneven recovery.
  4. Valuations are unfavorable given most stocks and bonds appear expensive, and signs of a bubble (NASDAQ vs. the rest of the market are back to highs in 1999) are visible. The one saving grace is that on a relative basis, stocks are not as overvalued when compared to the ultra-low level of interest rates.
  5. Liquidity is a favorable factor going for the market right now. So long as the Feds continue to keep rates low and pump up liquidity, it is hard to argue for a sustained near-term decline.  However, liquidity does not solve the problems of weak consumer demand, high unemployment, and growing fiscal deficits.
  6. Technicals for many parts of the market are strong and might indicate potential for solid returns. Price momentum is robust.   That does not apply to many pockets of the market, such as bank, energy, and many small-cap stocks as well as the US Dollar.
    Parts of sentiment feel bubbly but are not quite at maximum euphoria.  (This indicator is our least favorite, but we would be remiss not to acknowledge its potential to keep working.  It is one of those things that keeps working, until it no longer does, often before a tangible turn in fundamentals or news flow.)

Political risk appears skewed to the negative side.

Presidential and congressional elections in November might be one of the most momentous in years.  If Democrats manage a clean sweep, risk exists for slower growth and rising spending and regulation, factors that the market might not favor.  Another scenario of a President and Congress split by party might add to deadlock, but perhaps a more favorable (less unfavorable?) market scenario.  At this point, we think either scenario is a coin flip (50/50).


CARES Act (COVID-19 Relief): What to know

  1. 2020 RMDs waived – contact us for details
  2. Roth IRA conversion strategies – instead of taking RMDs, consider converting those balances to a Roth account(s)
  3. Coronavirus related distributions – individuals can take up to $100k in distributions from retirement accounts subject to certain rules. (contact us for details)
  4. Special tax relief for CRDs (coronavirus related distributions) – complicated. If you need help, contact us
  5. Relief for plan loans – special rules apply. (If you need money, contact us for details.)


Our strategy going forward:

Since the spring, markets have been creeping higher as the Federal Reserve has pumped liquidity to support the economy.  While we are mindful of opportunities, we are also sensitive to try to mitigate the potential downside from the risks mentioned earlier.

In short, we are:

  • Watching your money
  • Being careful
  • Looking for ways to improve
  • Keeping you in the loop

So much has happened since January. Even though we have communicated a lot with you in writing, we still want to hear how your situations have changed. Understanding your situations will help us serve you better.



Petr Burunov, CFP®
President / Wealth Strategist

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