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What You Need to Know About the Coronavirus Stimulus Package

Friday March 27th the House passed a substantial stimulus bill aimed at combating the dramatic economic slow down stemming from the coronavirus, and President Trump signed it into law that same afternoon. The CARES Act stands for Coronavirus Aid, Relief, and Economic Security Act.
Markets continued to exhibit high levels of volatility this week, with strong positive days on Tuesday, Wednesday and Thursday. In fact, the Dow Jones Industrial Average experienced the shortest bear market ever in its more than 100-year history as it climbed back above bear market territory on Thursday from its low only three days prior.

The United States now has the most confirmed cases of the coronavirus across the globe, as considerations around the balance between economic and physical health entered the mainstream.

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Weekly Returns

S&P 500: 2541.5 (10.3%)
FTSE All-World ex-US(VEU): (10.0%)
US 10 Year Treasury Yield: 0.68% (-26.1%)
Gold: $1,621.61 (8.2%)
EUR/USD: 1.114 (4.1%)

Major Events

  • Monday – The Fed announces a variety of initiatives to help support the U.S. Economy, including some never-before seen initiatives such as purchasing U.S. corporate debt & expanding its balance sheet in an as-needed fashion, without reference to a specific cap.
  • Tuesday – The Dow Jones Industrial Average had its largest jump in value since 1933 on hopes that a Fiscal stimulus deal would be reached.
  • Wednesday – Yields on Treasury bills dipped below 0%, as investors sought the safe haven of U.S. government debt. Bond yields decline as their price increases.
  • Thursday – News of previous week’s U.S. unemployment claims released showing an explosion of claims submitted in excess of 3 million. The previous record was 695,000 in 1982.
  • Friday – The coronavirus relief bill (CARES Act) was signed into law.

What You Need to Know About the Coronavirus Stimulus Package

Markets surprised many investors this week with some substantial positive market returns amidst continued uncertainty around the economic impact of the coronavirus. Much of the positive performance this week can likely be attributed to the U.S. government’s fiscal and monetary response. While this week was met with optimism overall, investors should remain prepared for continued volatility.

Here are some of the more substantial aspects of the CARES Act that will impact Americans directly:

Checks in the mail (or electronically) – Many taxpayers can expect to receive $1,200 direct from the U.S. federal government, subject to some income limitations. Specifically, if your Adjusted Gross Income was $75,000 or less as a single individual you should expect to receive $1,200. This amount doubles to $2,400 for married couples with income of $150k or less.

If your income is above these amounts, you’ll be slowly phased out of any payment according to your total income. Parents will also receive $500 for each qualified child, also subject to the same AGI and phaseouts referenced above.

Required Minimum Distributions – Required Minimum Distributions are suspended for 2020, allowing individuals to defer taking distributions from retirement accounts if desired. For those who’ve already taken Required Minimum Distributions in 2020, they may actually be able to return those funds to their IRA and push any further distributions into 2021.

Early Retirement Account Distributions – Individuals who would normally incur the IRS’ 10% penalty on early distributions are exempted for ‘coronavirus-related distributions’ of up to $100,000 of distributions in 2020. While the 10% penalty is waived, distributions may still be considered as ordinary income. This ordinary income can be spread over 3 tax years, lowering the tax impact. Individuals also have 3 years from the date of the distribution to repay all or a portion of the distribution taken if they so choose.

Worried about the markets? Download your free guide to market volatility.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Paul Deer, CFP®
Paul is a Certified Financial Planner® and has been with Personal Capital since they first moved to Denver in 2013. With over a decade of industry experience, Paul’s current role as Director of Advisory Service keeps him focused on a team of over 60 Financial Advisors and their clients.

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