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Astoria Strategic Wealth

Covid-19: Federal Reserve Actions and Recommended Client Considerations

We first want to pass along our enormous appreciation for all those working in our health services industries, the scientists fighting for cures in our laboratories, and to the families and friends that support them. Our prayers are with any individuals and families directly affected by the Coronavirus, medically or otherwise. This health crisis will impact various sectors of our economy differently, and we stand prepared to adapt your respective financial plan(s) as needed and when appropriate.

We have made a deliberate effort to reach out to every client in the past week during what now has been declared by the Trump Administration a National Emergency. We hope you understand that our purpose in doing so is to underscore and assure you of how we are managing through this evolving and extraordinary time. We built our firm with an advisor/client ratio that supports that level of service.

Please know that from a business continuity perspective, we at Astoria are inherently prepared to operate in a ‘socially distanced’ environment. Our infrastructure, systems redundancy/optionality, and communication methods we employ each and every day provide for a seamless transition to what many companies are grappling to begin to build.

As for financial market performance, just as we indicated that the 2019 10-20%+ earnings were not sustainable, we believe the current market volatility will also not persist. This too shall pass even though it feels painful – calm is contagious and rational thinking rewards those that do. There are many opportunities to take action during this time and we are employing those as appropriate.

  • For those inclined, adding cash to portfolios, if and only if your Emergency Fund is fully funded. For those anticipating a loss in income such as travel and leisure associated professionals, some medical professionals (particularly elective procedures), “high-risk” health individuals whom are in professions where working virtually is not an option, etc., please considering augmenting your emergency fund as you are able. We are happy to talk through scenarios with you.
  • Tax Loss Harvesting
  • Household rebalancing to model asset allocation (e.g. bonds have performed better than equities)
  • Great time for 2019-2020 IRA contributions if you have not made them yet and your Emergency Fund is funded.
  • Re-evaluation of Roth conversions: For traditional IRA assets that have dropped in value, converting now may be advantageous. While this strategy necessitates a tax liability at your ordinary income (OI) tax rate now, since the amount of money you are converting is lower, so will be your tax bill relatively. This money can now “rebound” possibly in your Roth IRA and be available for you and your heirs tax-free.
  • Re-evaluation of mortgage refinancing or other major loans as rates are likely to drop
  • Begin to adjust that we may be living in a social distancing environment for some time. There are silver linings in every scenario. For those with college kids home, your food bill is probably not among them ;), but time to regroup and redefine some of the things we do for fun may be healthy in and of its own right.

In an emergency move on Sunday (March 15th), the Federal Reserve announced it is dropping its benchmark interest rate to 0% - 0.25%, and is launching a new round of quantitative easing (“QE” - ie large scale purchases of government bonds and other financial assets to inject liquidity into the market). The QE program will entail $700 billion worth of asset purchases entailing Treasury’s and mortgage-backed securities. The Federal Reserve Bank also slashed the rate of emergency lending at its discount window by 1.25% (down to 0.25%). These measures are intended to translate into better liquidity for the global markets, which should ultimately normalize the unprecedented market moves that we have seen this month (or perhaps a new normal to be established).

We are fully confident that we will get through this, financially and otherwise as we support one another and take responsibility for other’s welfare, person-by-person. Beyond taking care of ourselves and our loved ones, we look forward to bearing witness to and doing our part in unifying against these unpredictable and historic circumstances. For those that are now graduating from high-school (potentially virtually!) – you were born shortly after 9/11. You are learning at a young age that we survive these events – together.