I've seen many different administrations since I've been a professional in this industry, and I've seen business change their plans and be able to be nimble around whatever the environment dealt them, whether it was regulation, whether it was taxes, whether it was tariffs, whatever it might have been. I've seen business, good strong business, change their plans and be nimble to work with whatever is there. That's exactly what we have to do with our clients is when we're managing someone's life savings and partnering with them, walking alongside them on their journey, we have to be nimble. Welcome to Keen on Retirement, a show dedicated to helping you thrive before and during your retirement years.
If you are looking to grow and protect your wealth and want to make the second half of your life the best half, then listen in as well as advisor Bill Keen and his host sort through the key issues that you need to know in a lively and candid way. Hello everybody and welcome back to another episode of Keen on Retirement. I'm your co-host Steve Sandeskin with me as always as Bill Keen and Matt Wilson. Gentlemen, how are you today?
We're doing good, Steve. It's been quite a year and we're just progressing through it day by day and it's not so bad. That's right. A lot of news that's happened here since we recorded our last episode, so I think we're probably going to jump into it.
But Matt, any thoughts from you on what's going on here? I had a webinar at the end of October, kind of pre-election, what's going to happen. A lot of things are unfolding post the election, so a lot of things to talk about today. I guess we could jump right in.
Yeah, and of course we just got some very exciting and encouraging news on a potential COVID-19 vaccine. Pfizer just released results stating that their COVID-19 vaccine is more than 90% effective in preventing COVID-19 infection among people who had not been previously infected. That's a big market moving event. We're recording this on the day that actually was announced, so the market is performing very well in light of that.
The next step is they will have enough safety data, which is specified by the FDA to go for emergency use authorization by the third week of November. Pfizer has said that they have 50 million vaccine doses, their goal is to have 50 million available in 2020, so by the end of the year. Well, I've had a few questions already come up today just to make this clear. This is not like RIM DISAVER, which is an antiviral of viral treatment.
This is the actual vaccine itself. That's right. It's the second infection. Yeah, I remember when we talked about the vaccines on a podcast two or three episodes ago, you did a great job explaining the different types of vaccines.
And you mentioned certain vaccines were required to have two shots. Is that the case with this particular one? Yeah, the Pfizer vaccine is a two-dose vaccine that takes 28 days to achieve effectiveness. So you have the first dose and then 28 days later, you have another dose, and it is one of the vaccines that requires refrigeration.
Very cold, too. Like negative 100 degrees or something. Very cold. Almost like unbelievable.
Like the different, like, it's like, well, how are we even going to make that work? But that's the Pfizer vaccine. And the Moderna and the two others, there's three more that still have phase three trials going on right now. Moderna has said that they expect to announce at the end of November, and then the other two have all both hinted at the end of the year.
So those other ones, they all had little different characteristics around them. So there was some that was single dose. Johnson and Johnson, I believe, was single dose, and ones that didn't require so much refrigeration. So there's, I believe, by the end of the year, we're going to look up and have multiple options when it comes to the vaccine and the administration of it.
And the concept of us being back to some semblance of normal is more realistic than maybe a lot of us could consider not that long ago. Yeah, two weeks ago, the news about all the increase in cases and the daily case numbers going up significantly, not only here in the U.S., but across the world. And we're seeing, you know, lockdowns in other places around the world. It really did impact the market.
I believe that impacted the market probably more than the election did in that week before the election was just, all right, are we ever going to get rid of this thing? And are we going to have to shut the economy back down? And this is providing some light at the end of the tunnel, so to speak, when it comes to COVID and the potential cure for that or at least the vaccine? I think that it's a legitimate indication when you come in and you see on Monday morning, when we came into the office and we're seeing the Dow called up, what, 1500, 1600 points, the Russell Small Cap Index, six, seven percent on the day.
A lot of those positions, the cruise lines, the airlines, energy companies, certain companies that you had been talking about this too, in fact, you just talked about this, your most recent quarterly update. This exact information that those were the companies that we could see, some of the biggest turnarounds in that had lagged the tech stocks. Of course, it lagged the tech stocks, but you said that those could be the areas that we see the most explosive move from where they were and literally just a week later or so here that's playing out. Yeah, the initial kind of move is to see those areas bid up, like airline, cruise lines, hotels, travel booking sites, movie theaters, rental car companies, theme parks, those are because hey, the outlook for them has changed dramatically.
We're going to see more people travel and more people go out and about and do things that they haven't been able to do. The other kind of issue too is that one, the Pfizer announcement is greater than 90% effective. So the initial indication was 60 to 70% was what they were looking for. So that means as people take it, the likelihood that they're immune to it is significantly higher now.
We've already seen mortality rates not necessarily. They've gone up a little bit, but they weren't peaking in the most recent surge in new cases like they were in March, April. So the vaccine, we talked about the herd immunity and we don't need that many people to get it to at least bring the deaths down. The most compromised people, whether they take the vaccine or not, are most likely going to be the ones that are prioritized to receive it, it kind of goes around the rest of the demographics after that.
When we've managed portfolios through this year of 2020, and we've managed portfolios much longer than that, but through some very difficult times, 2000 and 2001, 2002, 809, other times in that timeframe where things were difficult, but especially in 2020 when things were about as difficult as you could get with the varying factors. I still say the fact that we stick to our guns, we talk about diversified portfolios, you don't just in the course of some stressful event, take all of someone's long-term assets that they're going to be living on for the rest of their lives and shove them over into the technology sector, because that's the sector that's temporarily running wild because of a pandemic. No way I would recommend someone doing that. And we knew that the way that things have and flow, the way that cycles and sectors work, that the diversification and the rebalancing is the way to go and we're starting to see that play out over the last few weeks and especially this week.
Yeah. I mean, that is, it's been an interesting thing to see the kind of market response to what the vaccine really does to the economy and everything else going forward. But also the economic data that's been coming out, I wouldn't say it's great data, but the trend of the data is still showing signs of improvement. It's not like economic data has been getting worse.
It recovered here in the summer and it's still recovering. I mean, we saw the jobs number come out, under 7%, 6.9. Yes. Now, earlier this year, before the pandemic, it was three and a half, was the percent of the workforce without jobs.
It got up to 14. We went from lowest level since 1969 to the worst level since the Great Depression in like four months. And now we're below 7%. And that does speak to the interventions that the government did via fiscal and monetary policy, the stimulus they put out, what the Fed did with backstopping certain areas of the economy and the market.
So it's gotten to this point, but we're seeing manufacturing data come out strong. You know, factory orders are strong, services data strong. So all the economic data still pointing to this v-shape recovery. Now the COVID-19 vaccine just shows us that, well, let's expect that to continue.
No reason to expect that not to continue with the rollout of this vaccine. Yeah. And I think what I find fascinating about all of this is just the resilience of the US economy. And so when we did have the initial shutdown here earlier in the year, there were some pretty draconian estimates in terms of what was going to happen to the economy.
And I think the worst fears that were out there, even though it was really bad, what actually happened, the worst fears were certainly not realized. And I think we're also coming back a lot faster than a lot of people were thinking. And yes, we still have a lot of people that are unemployed. We still have a lot of people that are really hurting out there.
There's no question about that. But I think the government stepped in, the Federal Reserve stepped in and provided a lot of support, which has super helped. And now with this great news on the vaccine, the markets are roaring again. So yeah, I think we've got a lot of positive momentum going into the end of the year here.
Yeah. So I think the election, I hate to say that it's not over yet. It seems like it's clearer than it's a Biden-Harris victory, but it's not technically over yet. I believe that President Trump is going to contest it.
Now, all the research that I've read about it and the market too, I think the market response is that it probably isn't going to go very far in terms of how contested is it? Because there's so many variables that have to happen to kind of push the vote count over from Biden over to Trump. Whereas in 2000, it hinged on one state. There's a lot of different states that would have to change if we were to see that happen.
So that was one of the things I talked about as a potential volatile event was that it's going to be contested. The markets might react in a negative way, but so far markets are not reacting in a negative way. And I believe it's because the markets kind of view that as a very small likelihood that all of these things would change to where Trump would win. But either way, we know a little bit more clarity on what's happening with the president and then also who's in control of the Senate.
Because that is a big thing about the markets looking at is do we have a divided government or not? The divided government basically tells us that if Biden is the winner of the election, then Republicans are in charge. We probably won't see many things change that I think the market was afraid of. I believe we won't see any significant changes to the tax code over the next couple of years.
Most likely not going to see any moves or discussion on like a Medicare for all or a Green New Deal. Those definitely seem to be off the table with the setup that we're currently seeing with the administration. And you might recall again, a number of podcasts ago we walked through completely objective historical perspective on how markets performed, how GDP performed under these different scenarios. And the data all pointed back to a kind of gridlocked Congress and White House has been the best for markets and GDP.
Do you recall that? Yeah. And the bottom line was it really didn't matter who was in charge. It's just the fact that most of the time the market goes up and the policies that one individual or one party could put in place, they're muted compared to what the rhetoric is.
Not to say that doesn't matter in politics, don't matter. But the market always seems to find a way in light of whatever the situation that's thrown at it. I've seen many different administrations since I've been a professional in this industry. And I've seen business change their plans and be able to be nimble around whatever the environment dealt them, whether it was regulation, whether it was taxes, whether it was tariffs, whatever it might have been.
I've seen business, good, strong business, change their plans and be nimble to work with whatever is there. And that's exactly what we have to do with our clients is when we're managing someone's life savings and partnering with them, walking alongside them on their journey, we have to be nimble. We have to help our clients to be nimble and pivot to the things we have to be looking for. What's happening with taxes?
We have to be looking at these items and issues, whether it's in this case, maybe a state planning changes. If you say taxes, you say may not change, to some extent they might. There could be another act or bill that comes out that we have to pivot for and be prepared for. That's, I think, one of the key themes to this is, yes, we want to talk about this information objectively.
We want to be clear. We want to be up to date. But we have to make decisions on the ground and the trenches for each of our clients and ourselves, of course, and our families on how to deal with what we've been dealt, whatever that might be, that tomorrow breaks. Yeah.
And what I would say to that too is that even if there isn't any expectation of major tax changes in the code over the next couple of years, there's still lots of opportunity for tax planning because the outlook for taxes, maybe even over the next 30 years, are probably higher. So just over the next couple of years, yeah, maybe we weren't going to see a significant change where it's at today, but there's very high likelihood that we're going to see higher taxes in the future. It may not happen, but we have to make a plan for that or at least have those conversations so that we're setting ourselves up, our clients, families up, for the best possible outcome in the future. That's right.
I think it might be interesting for our listeners to hear. I get asked this too, this question. How are you all doing? How are your clients doing?
Is everybody nervous on the edge of their seats? Are they full of anxiety riddled with fear? Do they want to get out of a stock market? Sell all their investments?
I get asked that a lot. I get asked that every so often. And the reality of it is 99% of our clients have been on the road, on the journey for a while. They've built wealth by going through market dips and by experiencing the upsides and going through every so often a bear market and they see it, they understand it, and they're not on the edge of their chairs.
They're not riddled with anxiety. But every so often we do get a call and I think we got maybe two this time a couple of weeks ago before the election, when we were experiencing a little volatility on the downside there, asking if we should sell everything, go to cash till after the election. And we tell folks there's no silly question if it's on your mind, ask us and we'll very respectfully answer the question. But could you imagine had someone sold all their investments two weeks ago, Matt?
I mean, at this point, would they be down 10% off 10% or so? The market was down that week before, 6 to 7%. And then last week it was up, 6 to 7%. And then the first day, the day we're recording this, it was opening at up 5%.
So I mean, it just goes to tell you that. And we've talked about this a lot. Our viewpoint, our emotions, the market doesn't really care about any individual person. Especially when it comes to politics, I believe the best investors, they divorce their investment decisions from their political views.
That's right. It's not easy to do, but it is something that I've never seen a successful person, a successful investor who has just made all of their decisions based on what's happening in the political realm. I have not even. And I mean, it doesn't mean, again, it doesn't mean it's not important.
There's not planning opportunities and there's not issues. I mean, like right now, if we're looking at a Biden victory and we have a Republican controlled Senate, I mean, worst case scenario, we don't know there's two Senate seats up in another election to run off in January. Those could both go Democrat and that means we have a 50 50 Senate, which then the tie goes to the vice president at that point. The odds are that it's going to be the split.
So it's still Republicans have a majority, but not a significant majority. But you know, Biden supposedly has a good relationship with Mitch McConnell and they believe that they can have productive conversations and maybe a better deal than they've been able to do in the past. You know, also there's fears over the stimulus and what's going to happen with that. COVID-19 though is the reason for the stimulus doesn't mean we don't need any more stimulus, but you know, we're coming up with the solution to at least prevent us from just this unlimited stimulus forever.
And the jobs report to that came out at the end of early part of November was very good and kind of tells us well, maybe there's not as much stimulus as needed. So, you know, maybe it's only a trillion dollars in stimulus that might get passed. Only a trillion. Yeah.
You know, interesting how all that comes together, but that's all those variables going to impact to the day to day view on the markets that weren't necessarily getting a lot of viewpoints or a lot of talking points pre-election. You know, you look at other things that might change within the government. I mean, right now the Treasury Secretary, Steve Mnuchin, he's, you know, most likely not going to be around if it is a Biden victory. And so who's going to take that roll over?
I mean, the market probably wouldn't like Elizabeth Warren. And I don't think Biden has, you know, tapped her, hasn't really tapped anybody, but it isn't looking like he's going to choose her either. So, you know, that's a positive view from the market standpoint. You know, they have some former Tundra secretary of the Treasury that they're looking at for that pick.
And then who's going to run the Federal Reserve? You know, Powell will be up for, I guess, a renomination. And you know, it's likely that he does actually get the not again. He did, I believe he did a very good job.
Most of Wall Street has been very positive with Powell and how he's handled everything. You know, at times, President Trump didn't like Powell, but, you know, I think he navigated the crisis pretty well. And it's not uncommon for a new administration to actually continue with the same Federal Reserve Chairman. I mean, that happened with Obama.
President Obama gave Ben Bernanke a second term atop the Fed, who was first hired by George W. Bush. And then Alan Greenspan, he served five terms. Yeah.
He was nominated by Reagan. And then he was in there, George H.W. Bush, Clinton, and then George W. Bush.
So even though Powell's a registered Republican, there's very good odds that he will continue in that role, which from a market standpoint, again, that's a positive sign that things will continue on the same course as they have been. Do you think that Biden would be okay or even lean to being happy if we have a Republican controlled Senate that would allow him to stay more centrist? Yeah, I don't know. I guess we could try and ask him, see if he'll answer the question.
I don't know. Yeah. Maybe that he's almost wishing for that or you try to say that without saying it, he may prefer that. Sure, sure.
Yeah, maybe. I mean, the markets do like the divided government side of things. And, you know, maybe he would get more pressure to be more on the left. I think he isn't as left leaning as some of the other candidates that they came out, you know, Sanders and Warren specifically.
So this allows him to kind of blame it on the other party, but not have to go as far to the extremes on some of those policies. Because if it was a Democratic controlled Senate, yeah, maybe they would be pushing for things that he wasn't really in favor of. Right. I mean, there's definitely a lot of things to talk about, a lot of things to look at.
But we look a lot on, well, okay, well, why is the market rallying and where could the blind spots be? But, you know, there are several reasons why the market's been performing well over the last few weeks. And partly the election by and largest behind us. I mean, again, there's still going to be some discussion around recount and pushing that to, you know, potentially the Supreme Court, but it's still unclear as the time of this recording, how that even gets to that far.
And, you know, we may see Trump concede, you know, who knows, you know, time will tell on that one. But markets kind of viewing that the election is behind us. And we do have a divided government, most likely, and we're not going to see any significant tax increases or, you know, many very progressive measures rolled out. You know, also we have just central banks, you know, again, the Federal Reserve here, but across the globe are very accommodative.
I mean, global central banks are re-engaging and, you know, really looking at more stimulus. You know, we're hearing that in Australia and the Bank of England, you know, both doing more quantitative easing. Two weeks ago, the ECB signaled that it's increasing its quantitative easing. You know, the Federal Reserve here didn't necessarily mention anything.
I think they were waiting till after the election. But, you know, the market here is assuming the Fed's going to keep doing what it's been doing, which has been very accommodative. We have the COVID-19 vaccine. I mean, the announcement of that is, you know, very good.
Markets have been anticipating an announcement, but I believe the Pfizer announcement was much better than expected. So that is another big positive. And then, you know, we've got good economic data and I think good earnings too. I mean, yes, earnings are coming off a low level, but earnings are still, they're recovering.
And that is really the viewpoint that the market's looking at. And it's looking like earnings for this year when you take all the companies within the S&P 500, about $170 a share, which back in March, April was considered, I mean, not even possible. So to see all of that kind of in the midst of the pandemic, the shutdown, you know, we have the election. We talk about how many hurdles this market, everything we've gone through this year, pretty crazy.
To Steve's point up front, it demonstrates the resilience of the economy here in the United States. And it demonstrates, again, why we like to say we have to have that plan in place for folks and keep our head down and work the plan. And yes, we do need to be informed about what's going on politically and economically and with the news of the day, if you will, but it's really having that plan in place, isn't it? And sticking to that plan, that man, I'll tell you, it's during the toughest of times, if you've got something to fall back on like that where you've thought through, where you're wanting to head, it sure as heck reduces the likelihood of you making a bad mistake that can blow your family off track, doesn't it?
It does. And that's what I encourage folks, you know, reach out, of course, we want to chat with you, especially if you are concerned about the election, I mean, we're not telling people not to worry about things and definitely, you know, talk to us, but we will provide you our perspective and definitely come up with the plans that go through the scenarios, you know, it's just making those kind of, I almost want to say knee jerk, you know, reactionary decisions and those just, those are very difficult to unwind in a lot of times because markets will do things that no one anticipates, no one expects, and they will do them for much longer than anyone realizes either. That's right. Well, let's go ahead and wrap up here.
I think we've got a lot of really good things that we talked about here. We have a lot of positive things that are happening. We talked about the great news on the vaccine. We talked about the election and maybe your candidate one or maybe your candidate didn't win.
I think either way, the market is fine and we're seeing a really positive response in the financial markets right now. We talked about the importance of the planning process and to stick to the plan to work the plan over time. And I think the other thing that for me, what has really been reinforced this year is that you can never bet against America. And I think that's just been so reinforced this year in terms of everything that happened with COVID this year and how people generally pull together, how we're doing the things that we need to do to turn around corporate America has pulled together to create a vaccine and get that done at warp speed.
And I think we're starting to see the results of that. I think we've got tremendous positive momentum going into the end of this year. And I think we've got that light at the end of the tunnel. We've got some really positive things to be looking forward to in 2021.
So I'm really excited. I'm really optimistic about what's happening here. And I think we've got a lot of things to be thankful for. So guys, as always, thank you for the show today.
Thank you for your comments, all the great work that you're doing with the clients here. And we'll look forward to the next episode of Keyn on retirement and to get more great episodes and all of the blog posts that we do, please make sure that you visit Keyn on retirement.com. And we'll look forward to the next show. Thanks, everybody.
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