Ed Bradley, CFP®, ChFC®

As counties began to reopen across the country, we have seen Covid-19 numbers spike at a faster rate than when the pandemic began in early March.[1]As many states are having to roll back or pause their plans to reopen their economies, we are reassessing the turmoil the initial wave caused the stock and job markets, so we can better prepare our clients as we brace for the impact of a potential second hit.

When the stock market, from its high, dropped 33 percent in March[2], it was important for me to speak to each of my clients to listen to concerns, answer questions, but most importantly, discuss proper next steps and set expectations. During those conversations and the days following, three themes became evident and I felt it apropos to share them as we head into the second half of the year.

Be diligent in raising cash for upcoming expenses

During good times, we all can fall into the trap of saying, “I don’t need this money until XX date. I’ll just sell my positions then.” The principle I want to instill here is, you want to move money to liquid cash within 12 months of actually needing it. As markets have rebounded and stabilized a bit, it’s a good time to reevaluate your expenses and emergency fund needs and raise the appropriate cash if necessary.

If 2020 has taught us anything, regardless of your goals, whether it be based on your business, saving for your child’s college, or your retirement, it is that you can never short-change your emergency fund. It acts as a safety net in times of uncertainty – and the only thing that is certain is that the rainy days inevitably come.

Evaluate your appetite for variability

A lot of clients in good markets feel like they are aggressive investors or feel like they can take on more variability. When the market plummeted, it became apparent who really was comfortable with their risk-tolerance. Now is a good time to do a gut check and ask yourself, “Was I comfortable with the recent variability?” and “Has my risk tolerance changed in the last few years?” If there are circumstances like a pending retirement, or a new life phase, it may be time to reconsider who you are as an investor and your appetite for variability.

At Mainspring, we have been completing risk tolerance questionnaires with clients; be sure to complete yours with your advisor.

Tax-loss harvesting

It would be wise to start having advanced-planning meetings with your advisor and CPA now. The idea here is that we have harvested losses in taxable portfolios. It’s important for clients in their 2020 tax planning with their CPA to discuss what losses were realized and the opportunities that may present for the rest of the year.

For some clients, the actions we took in the first half of the year during the volatile market are helping to create tax opportunities to consider for the second half of the year. For example: realizing gains on appreciated positions and selling stock options or RSUs, and other items more personally tailored to the client and their positions.

In times of such colossal uncertainty, it can be hard to see the bright side of the situation. So, I’ll leave you with this: cherish this time with family; we are creating memories of the time we were all forced to quarantine that will one day become the stories we tell future generations.

Enjoy the summer weather that is finally upon us to explore (at a safe distance) outside. And if all else fails, at least you can say you never made a TikTok video.


[1] Coronavirus updates: Almost half of all states are spiking at a faster rate than in the spring, SA
TODAY study finds

[2] Stock market live Thursday: Dow tanks 2,300 in worst day since Black Monday, S&P 500 bear market

Any opinions are those of Edward Bradley and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.