Jamestowne Investments Fall 2020 Newsletter

a life well planned is a life well lived

The Captain’s Log Fall 2020

Back to School Back to School – every parent’s favorite time of year.

New clothes, new shoes, new and renewed friendships, and most importantly the annual opportunity for an enthusiastic fresh start in life. The household energy is palpable as the youngsters head off towards their next life chapter.

For Ginger and me, this Fall’s back to school experience has been unique and bittersweet. Both children for the first time headed off to college leaving the two of us home in silence with the time and opportunity to ponder our individual and joint next chapters.”Being empty nesters provides us the neoteric time for selfreflection and a deep reevaluation of our collective priorities. Just a few weeks into this novel life circumstance, I remain hopeful the newly discovered quiet around the house brings with it a sustainable energy for a more productive and positive lifestyleWe

have already committed to more healthy eating and we both have become more deeply betrothed into our evening’s book of choice.

With the kids back at school and looking forward towards the Fall Season, in the investment community we now begin to shift our focus towards the details of 2020’s “year-end”. Like the annual back to school experience, this past year market cycle has given us a plethora of reasons to be hopeful and optimistic for an enthusiastic fresh start. If nothing else, the 2020 market cycle provided and reinforced some notable lessons in investment discipline and tactical asset management and, just like the challenges of the first day of school for our children, we as investment practitioners should take this opportunity to acknowledge these lessons and to move forward more skilled and confident in our craft. (continued on page 3)

JAMESTOWNE INVESTMENTS NEWS What’s Inside: Trend and Momentum Investing Political Elections and the Stock Market Historic Lows for 30-Year Home Loans Covid-19 and the Stock Market Required Minimum Distributions What's Changed Pearl's Fall Pet Safety Tips Recipe Corner

Newsletter Disclosures Securities and advisory services offered through Prospera Financial Services, Inc. Member FINRA, SIPC. 5429 LBJ Freeway, Suite 750, Dallas, TX 75240 The material in this newsletter does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Our firm does not provide legal or tax advice. You should consult with legal and tax advisors before making any investment decisions that would have legal/tax consequences.

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/ MAY LOSE VALUE

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A MESSAGE FROM CLAYTON Your Trusted Advisor The first great recitation of 2020 came to us from the time-tested absolute requirement to always remain ultra-high quality in our investment decisions. During the peak of the Covid economic shutdown, the stock market powerfully reminded us that any deviation from this long-standing discipline could leave the wandering investor holding little more than a pile of steaming nastiness. Quality balance sheets, management expertise, and marketplace dominance proved again to be part of the crucial defense necessary for the protection against the violent virus induced economic shuttering and unexpected staggering unemployment.

The second great lesson gleaned from 2020 was the age-old adage, “Never fight the Fed”. In the early stages of our Covid crisis the Federal Reserve stepped up confidently and provided the unprecedented life support and economic stimulus needed to maintain liquidity and to keep a floor level of confidence in our unsettled investment markets. When our economic forecasts seemed the most distressed, when businesses were permanently closing, CLAYTON JAMES and when earnings forecast across the spectrum were rapidly FINANCIAL ADVISOR contracting, the stock market somehow was able to see clearly through the thick and dizzying fog of confusion and rationalize itself beyond the chaos. Investors who remained true to the Federal Reserve’s life support policies have been rewarded nicely, investors who surrendered to panic have been punished.

The third epiphany of this year’s cycle personally helped me advance my thinking regarding the management of individual positions in investment accounts. This year, I had the opportunity to re-learn for no less than the 25th time, the importance of cutting losses, separating the wheat from the chaff, and moving on to better opportunities. We as lamentable humans always struggle with the emotions of underperforming positions and we continuously play the poignant game of “I don’t want to sell because I don’t want the loss”. The irrefutable damage in holding the “dog with flea’s” conundrum always conflicts with the more prudent best use of capital strategy. During 2020’s volatile gyrations, the winners unquestionably won big and the losers undoubtedly lost big. To avoid this trap and to navigate this madness, investors needed the discipline to eliminate the dogs early and redeploy the available capital into positions which were ripe for exceptional performance in the new “stay at home and work from home” marketplace.

With the lessons learned, with the experiences now behind us, and with the kids back in school the world now seems to be slowly returning to normal. We as individuals and as a community can now begin to focus on more predictable and rational life events like Presidential elections. As we wrap-up the 2020 election cycle, let’s all hope for the best outcome for our Country and let’s hope that somehow we can unite and move forward in a positive and productive condition.

My Very Best to Everyone, Clayton W. James, CFM, AAMS Managing Director

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Trend and Momentum Investing

Most people invest passively. That is, they direct money into an investment account or portfolio that is passively managed. Passive investment management, characterized by long time horizons and very little buying or selling, certainly has its merits. It can also have serious demerits in a bear market or within a poorly performing sector.

Trend investing and momentum investing take different approaches. Both of these strategies involve active investment management. Both also involve some degree of market timing, a tactic that some investors reject outright.

However, neither trend nor momentum investing rely on hunches. They are both disciplined approaches, based on technical analyses of the market’s direction and various market sectors. When things are going south (or north) in a sector or an industry, these approaches beg consideration as an alternative to a strict buy-and-hold (value investing) strategy. In fact, both trend and momentum investing are worth considering in all market climates.

How do these two approaches differ? In trend investing (sometimes called trend following), you use technical analysis to buy or sell a security based on sustained price movement. How close is the share price to its 52-week high or low? What does analysis reveal about the stock’s short-term direction? If the direction is up, you buy and hang on; if the direction is down, you can short the position (or wait it out). 1 Trend investing takes a distinct point of view about where the market is headed, and it is as much about when to sell as when to buy. A sensible trend follower will abide by a sell rule – which could consist of a trailing stop loss paired with a confirming indicator, for example.1 While trend investing centers on absolute price changes (changes in share prices weighed against changes in the market), momentum investing looks at share price changes relative to one another rather than relative to the state of the market. The goal of momentum investing is to find shares that are moving faster than the market.1,2 The momentum approach assumes that share prices that have outperformed others will continue to do so. It also assumes that poorly performing shares will continue to underperform. In other words, the winners will keep winning and the losers will keep losing. You may buy high through the momentum strategy, but you buy high with the belief that you can sell higher. Unlike a trend investing strategy, a momentum investing strategy takes no point of view about the direction of the market.1 These strategies are about playing not to lose as well as playing to win. They are also about taking advantage

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of the compound annual growth rate (CAGR), sometimes called the “time value of money.” A buy-and-hold investor rarely sells at a market top, or when particular shares peak. He or she just hangs on, perhaps far too long. A successful trend or momentum investor can take incremental gains and reinvest them in other shares headed in the right direction; market timing of the best sort.

You may have heard the statement that a penny, doubled every day, becomes a sum greater than $10 million in 30 days. Even at a 25% daily growth rate, that same penny becomes $8.08 just 30 days later. These examples are perhaps extreme, but they highlight one objective of trend and momentum investing: the idea of capturing compounding growth through active investment management.1 These strategies need not be divorced from others. Momentum investing and buy-and-hold (value) investing are compatible; in fact, some investors adopt a blend of the two strategies for the long run. Some investors have been known to blend trend investing with contrarian investing (in which you buy and sell in contrast to prevailing market sentiment).

Both strategies are not for amateurs. They embrace market timing, and fundamentally, market timing requires you to be right twice. You have to recognize the auspicious time to sell and the auspicious time to buy. The small investor who tries these tactics solo, absent of supervision from investment professionals, risks a great deal.

Historically, both strategies have had merit versus the norm. A recent Institutional Investor article compared a simple trend following strategy versus a buy-and-hold strategy across the years 1900-2014. The trend strategy would have invested varying amounts into equities per month depending on the level of the cyclically adjusted price-earnings ratio (CAPE) for the S&P 500 at the start of each month. The variance would have been between a 50% equities position (moving money into cash) and 150% (borrowing from the cash position to buy more equities). When compared with an unchanging buy-and-hold strategy featuring 100% investment in large cap stocks, the trend strategy was actually less risky than buy-and-hold beginning in the 1960s and earned an average of 0.8% per year better than buy-and-hold over this 115-year span.3 Citations.

1 - onewealthyteam.com/momentum-investing-and-trend-following-the-secret-to-significant-portfolio-returns [1/6/16] 2 - quant-investing.com/blogs/general/2015/01/13/10-myths-about-momentum-investing-squashed [1/13/15] 3 - institutionalinvestor.com/article/3505321/asset-management-hedge-funds-and-alternatives/market-timing-is-back-in-thehunt-for-investors.html [11/11/15]

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Do Political Elections Effect the Stock Market?

I recently received this extremely interesting pre-election and post-election market performance summary page from Lord Abbett and I felt it was worthy of sharing in this quarter’s newsletter. This is a topic I am asked about daily and I hope this historical summary information helps some investors manage the unlimited confusion as we try to draw lines between market expectations and election returns. As with all data, no hard conclusive evidence can be taken from this information but I do believe the overwhelming evidence suggest that regardless of the winning political party the market proves to be driven more by capitalist and economic forces than by Washington politics and policy. Let’s hope the same holds true this year.

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30-year Home Loans Fall to Historic Lows Investors and homebuyers take note.

Lately, it can feel like each day brings a new headline about fluctuating market behavior. But amid the ups and downs of 2020, there may be some potential good news on the horizon. On July 16, 2020, the interest rate for a 30-year home loan had fallen to 2.98%. In addition, the average interest rate for a 15-year home loan had declined to 2.48%.1,2,3 Good news for homebuyers. Keep in mind that just two summers ago, the average interest rate on a 15-year fixed-rate mortgage hovered around 4%, while the 30-year was in the vicinity of 4.5%. With the average interest rate on these loans at new historic lows, it may be a smart time for first-time buyers to consider making their move.

In other words, it's uncertain how long these historically low rates will last. Keep in mind this article is for informational purposes only. It's not a replacement for real-life advice. It’s always a good idea to consult with your tax, legal, and accounting professionals before considering any changes to your living situation.

Good news for investors. Believe it or not, hopeful homebuyers are struggling to find the right property: on July 4, 2020, the inventory of existing homes for sale was 31% smaller than it was in 2019. Even with these market conditions, 61% of respondents to a recent survey felt that buying a home in 2020 was a good idea.

This interest in purchasing a new home despite the COVID-19 pandemic may be considered a “coincident indicator” by many. In other words, if consumers feel confident enough to go home shopping, that could indicate slowly returning economic confidence as well.3 Good news for everyone. Real estate plays an integral role in the health of the economy. Even when considering the many advantages of homeownership, it can be easy to forget that it is one of the greatest sources of wealth and savings for many Americans.4 Whether or not rates will drop even lower is anyone's guess. Even though it seems unlikely, mortgage issuers are dealing with a level of uncertainty that makes it harder for them to judge risk and assess the long-term value of the loans they originate.

Citations.

1 - OCRegister.com, July 16, 2020 2 - Realtor.com, July 13, 2020 3 - FreddieMac.com, July 16, 2020 4 - TheBalance.com, February 10, 2020

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COVID-19 and the Stock Market

In the era of COVID-19, and the financial woes it has created, I often get asked, “Why is the stock market holding up so well when the economy appears to be struggling?”

To understand why the markets react — or don’t — to certain outside factors, it’s always good to keep in mind that the stock market is not the economy. I can’t stress this enough.

The stock market is considered a “lead economic indicator,” meaning it’s anticipating what economic conditions will look like 6-9 months into the future. While it can sometimes be a tricky concept to grasp, remember that the stock market’s price today reflects potential future economic activity.1 Another “lead economic indicator” is building permits. When there is an increase in building permits, it lets us know that developers are bullish about future home sales prospects. If building permits are down, it tells investors that builders may be concerned about interest rates and consumer confidence.2 Although helpful in general, lead indicators should never be seen as infallible. Abrupt and unexpected changes will prompt lead indicators to rapidly recalibrate their expectations for the future. Look no further than when COVID-19 grabbed the headlines in early March, which ended the stock market’s 11-year bull market.3,4 Keep in mind that in addition to lead indicators, there are lag indicators and coincident (real-time) indicators. We take all three types of indicators into account to help provide context for what can often seem counterintuitive behavior, especially in the face of intense global disruption.

Let me know if you’d like to chat about the economy or any other topics you’re pondering. I’m always here to help.

Sincerely, Clayton

Citations.

1 - Investopedia.com, April 18, 2020 2 - TheNatureOfMarkets.com, 2020 3 - CNBC.com, April 6, 2020 4 - USNews.com, March 11, 2020

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Required Minimum Distributions What's Changed?

Q: What makes 2020 a unique year for retirement?

A: Big changes to retirement account rules.

You can attribute those changes to two major pieces of legislation: the Setting Every Community Up for Retirement Enhancement (SECURE) Act, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. You may not have to withdraw money from your retirement plan this year. In most circumstances, you must make annual withdrawals from traditional IRAs and workplace retirement plans once you turn 72. The CARES Act suspends this requirement for 2020.1 The same goes for inherited IRAs. IRA beneficiaries, of any age, are not required to draw down or empty these accounts in 2020.

Please note, though, that under the SECURE Act, most non-spouse beneficiaries of a Roth IRA are required to have the funds distributed to them by the end of the tenth calendar year, following the year of the original owner’s death.2,3 Annual IRA or workplace retirement plan withdrawals: For 2020, the Internal Revenue Service allowed withdrawals to be put back if done so by August 31, unless you took it in January – if you did take it January, no such luck. This also applied to inherited IRA withdrawals taken this year.2 As a reminder, money that is distributed to you from traditional IRAs and workplace retirement plans is taxed as ordinary income. When such distributions are taken before age 59½, they may be subject to a 10% federal income tax penalty; although, the CARES Act allows some exceptions to these penalties in 2020.4 You may keep contributing to your traditional IRA as long as you earn income. Before the SECURE Act passed, you had to stop contributing to a traditional IRA when you reached RMD age, i.e., age 70½. Contributions to traditional IRAs are now allowed past the current RMD age, as long as you meet the earned income requirement.5 Some pre-retirees might be eligible to take CRDs. Yes, CRDs: coronavirus-related distributions of up to $100,000 from qualified retirement plans and traditional IRAs. Under the CARES Act, retirement savers may make such withdrawals in 2020 without a tax penalty, but only under the following conditions.

One, the plan has to permit such distributions. Two, you, your spouse, or one or more of your dependents must have been diagnosed with COVID-19. Three, you must personally have experienced negative financial consequences due to COVID-19. You may elect to spread the distribution over three years for tax purposes, and you also have the chance to put 100% of it back in the plan within three years, without having the withdrawn amount characterized as taxable income.1 The SECURE Act has impacted the timing of some charitable IRA gifts. At times, some retirees would rather have a tax break than the income and income taxes, resulting from a mandatory IRA (continued on next page)

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withdrawal. As a result, some arrange qualified charitable distributions (QCDs) from traditional IRAs, which may fully or partly satisfy their annual RMD amount. A QCD can be as large as $100,000. (Original owners of Roth IRAs never need to make mandatory withdrawals.)6 Keep in mind that this article is for informational purposes only. It’s not a replacement for real-life advice, so make sure to consult your tax legal and accounting professionals before modifying your strategy.

While the SECURE Act pushed back the age threshold for mandatory IRA withdrawals from 70½ to 72, it left the QCD age threshold at 70½. This gives owners of traditional IRAs a window of about a year to arrange a QCD, which could help manage an IRA balance. A smaller IRA balance implies smaller RMDs in the future.6 The “stretch” IRA strategy is basically over. As a provision of the SECURE Act, nearly all IRAs inherited after January 1, 2020, must be emptied of assets by the end of the tenth calendar year, following the year of the original owner’s death. Previously, distributions from an inherited IRA could be “stretched” across the lifetime of the beneficiary. A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and children of the IRA owner who have not reached the age of majority may have other minimum distribution requirements.3 Citations.

1. Finra.org, April 10, 2020 2. CNBC, June 29, 2020 3. Forbes.com, December 17, 2019 4. Forbes.com, June 23, 2020 5. Morningstar.com, February 13, 2020 6. Fidelity.com, July 2, 2020

GOLF TIP Get a driver with an appropriate loft for your game.

In golf, your driver or driving iron ideally has a clubface that can help you get more carry off the tee.

High handicappers may benefit from having a driver featuring at least 10.5 degrees of loft. Golfers with a relatively low handicap may find a driver with 9-9.5 degrees of loft more to their liking.

Source: Golfweek, September 1, 2020

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Pearl’s Fall Pet Safety Tips 1. Beware of anti-freeze! Ingesting antifreeze is lethal. Unfortunately, both cats and dogs have been known to lick this sweet tasting substance. Make sure to check your car for leaks and make sure all bottles are stored far away from your pets.

2. Do not leave your pets outside for prolonged periods of time. It does not have to be Winter for it to get cold--especially for puppies, senior pets, and smaller animals.

3. Beware of ticks. It’s still tick season and playing in the cool autumn leaves is one of the many ways your pooch could get them. Consider using a flea and tick monthly pill to keep them at bay.

4. Let ‘em have their fur coat. If you have a dog that you shave during the summer, let him start growing his coat back in the fall. Just like you need your Fall/Winter coat they need theirs too.

5. The changing of seasons is great time to check your pet ID tags and microchip. Just take 5 minutes to make sure all your pet’s information is up to date and in proper order.

6. Make holiday arrangements with your dog walker, pet sitter or doggy day care NOW. As the holidays approach, most of us will get busier and possibly have to travel. Take time out and plan ahead so you can make the holidays easier on your pets.

7. Fall celebrations such as Thanksgiving and Halloween, often mean people coming over to visit your home. If you have a pet that has special needs or is wary of new people, be sure to tell your guests about your pet before they come over.

8. Make sure your pets can’t escape through the main entrance of your home. This is especially important if you plan on having several guests in and out of the house this holiday season. It may be worth investing in a baby gate or creating barrier between the door and your pet. Especially if you have pet that’s known for bolting.

9. Be careful with holiday treats. Aside from known hazards such as chocolate, cooked bones, raw bread dough and many fruits and vegetables can also be life threatening to pets.

10. Be careful with decorations. Many shiny, new decorations look like really fun toys to your pets.

Make sure decorations are out of reach because many of them contain toxic metals and can become choking hazards.

We congratulate Drake James on his graduation from Hampton Roads Academy this year.

Drake joined the class of 2024 at Hampden Sydney College this Fall and plans to pursue a business degree.

Roll Tigers!

Knowing each client comes to us with a unique individual background and a unique set of personal experiences; our mission is to guide and inspire each client's journey towards financial success, investment confidence and fiscal well-being. To help all clients succeed in this journey, we utilize sound, efficient and relevant investment products, principles, and policies. Our firm places significant value in providing the highest level of personalized customer service and communication. We operate with full transparency, and our success comes alongside our client's success.

A life well planned is a life well lived!

Peace of Mind Can be an Asset

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RECIPE CORNER

Shrimp and Grits Submitted by Reba McVey 1 ½ - 2 lbs shelled and deveined shrimp 6-8 pieces of bacon 2 c sliced canned mushrooms Red & yellow bell peppers 1 ¼ c sliced scallions or onions 2 cloves garlic 1 tsp. fresh lemon juice Several shakes of Texas Pete Hot Sauce • • •

Fry bacon- crisp and crumble Cook veggies until soft in grease from bacon Add shrimp, hot sauce, salt & pepper

Serve over runny cheese grits- I use instant grits with added cheeses from the refrigerator like cheddar, velveeta and parmesan We serve in a bowl with shrimp, veggies and juices over grits. Serves 4-6

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