Market Review

Proposed Capital Gains Tax Rate Increase and Your Money

jim Financial advisor, Market Brief, Market Commentary, Market Outlook, Stock Market , , , , ,
captial gains

Stocks ended mostly flat on the week, with an abrupt tremor on Thursday after President Biden proposed a sharp increase in the capital gains tax rate. Housing market and job reports remain strong. The Nasdaq-100 sits just below all-time highs. Indexes for the week; the Dow down 0.42%, S&P down 0.11%, and Nasdaq down 0.25%.

Last Week

Government stimulus, monetary policy, and vaccinations have led indexes to reach near all time highs. President Biden’s proposal to increase capital gains tax rates to 39.6%, led to a severe drop on Thursday afternoon. The markets quickly recovered on Friday. Housing data continued to grab headlines, with the median selling price for existing U.S. homes up 17.2% year-over-year to $329,100 in March. Existing home sales actually dropped 3.7% last month due to supply being so limited, while new home sales in March increased 20.7% month-over-month and 66.8% year-over-year. The average sales price of new homes also increased 6% from the prior year. Jobless claims fell to a pandemic era low of 547,000. This is the lowest weekly level since March 2020.

Week Ahead

The Federal Reserve likely will not be changing monetary policy at Wednesday’s meeting. However, with economic data improving and inflation perhaps moving towards 4%, investors will be listening closely for clues about a shift in strategy. On Thursday, we will get our first look at Q1 GDP, with strong growth of 6.6% expected. The other main event this week is a slew of earnings reports. This includes a third of S&P500 companies and many of the important names in the Nasdaq, such as Apple, Amazon, Facebook, Microsoft, and Google.

The week will close out with U.S. pending home sales and several GDP reports from Europe and Canada. Before getting up in arms regarding the increased capital gains tax, consider this news was a reaction to the proposal. Also, this proposal only impacts individuals earning more than $1m. Year-to-date index performance; Dow up 11.23%, S&P up 11.29%, and Nasdaq up 8.76% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

Erie, CO financial advisor with a focus on investments, wealth management, and retirement planning in Boulder, Louisville, Niwot, Lafayette, Windsor, Berthoud, CO.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Impact of Upcoming Earnings and Economic Data

jim Economy, Financial advisor, Market Brief, Market Commentary, Market Outlook, Market Review, Stock Market , , , , ,
earnings and economic data

Last week, investors’ expanding risk propelled U.S. equity indices 1-3% higher, driven by large-cap technology bursting out of consolidations. The Nasdaq paced the advance, while the S&P 500 scored its 22nd record high of the year. The S&P 500 roared past the 4000 level returning over 2.75%. The index is on its longest weekly winning streak since October of last year.

The VIX, a measure of volatility, slid below 17 to its lowest level since before the pandemic. U.S. Treasury yields were flat as investors weighed better than expected producer inflation versus dovish commentary from Fed. Economic data impressed once again. Producer prices increased well ahead of expectations in March, rising 1% over the prior month. Year over year, producer prices increased 4.2%, which was the largest yearly increase since 2011.

Continued claims, or the number of people receiving unemployment benefits, continued to slowly improve, falling to a one-year low of 3.73 million in the week ending on March 27. That represents a significant improvement from the high of over 23 million reached in May 2020. Another sign housing is affected by the rise in yields, mortgage applications fell 20%.

Earnings and Economic Data Ahead

Earnings season has arrived, and so has critical economic data. The largest financial institutions like J.P. Morgan, Goldman Sachs, and Bank of America will report later in the week. Also this week, investors will weigh the latest consumer inflation data on Tuesday and retail sales on Thursday. Fed chair Powell has repeatedly stated the FOMC believes rising price pressures will only be transitory and the labor market still has significant slack. Thereby they are nowhere close to removing support or changing their dovish stance. Thursday offers plenty of market-moving potential with U.S. retail sales. Retail sales are expected to rebound sharply, as well as weekly unemployment claims. Lastly, Friday’s building permits and housing data will be closely watched. The key is whether the recent weakness tied to rising yields continues to filter through the sector.

Year-to-date index performance; Dow up 10.9%, S&P up 9.9%, and Nasdaq up 7.8% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

Financial Adviser in Erie, CO with a focus on investments, wealth management, and retirement planning in Boulder, Louisville, Niwot, Lafayette, Windsor, Berthoud, CO

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Ripple Effect of the Blocked Suez Canal

jim Economy, Financial advisor, Market Brief, Market Commentary, Market Outlook, Market Review, Stock Market , , , , , , ,
suez

Despite the Suez Canal blockage, disrupting global trade, U.S. equity indices fluctuated between gains and losses throughout a volatile week. Month- and quarter-end flows hang over the market, but J.P. Morgan’s head quant expects flows to be net positive for equities, opposite of consensus. Also, the monthly jobs report is Friday.

Last Week

U.S. equity indices fluctuated between gains and losses throughout a volatile week but surged in the final hour of Friday’s trade. The Treasury yield rally consolidated amid technical headwinds and dovish Fed comments. The re-opening trade took a deep breath but is still +35% since the November 9 Pfizer vaccine announcement. The Nasdaq Composite failed to finish higher, but it did close notably off the lows. Energy dropped precipitously early on but sharply retraced losses after a cargo ship completely blocked passage in the Suez Canal.

Fed Chair Powell’s testimony reiterated the FOMC’s belief that inflationary pressures would only be temporary. Treasury yields began the week dropping significantly on Monday and Tuesday, as Fed Chairman Powell confirmed the Fed’s commitment to loose monetary policy. He insisted that the he does not believe a surge in inflation this year will be persistent or large. Powell believes that the Federal Reserve has the tools necessary to deal with higher inflation.

Existing home sales fell 6% in February, and new home sales dropped 18% Month-over-Month. However, new home sales are up +8.2% Year-over-Year. Durable goods orders fell for the first time in 10 months. Services activity came in at an 80-month high, supported by the steepest increase in new business in 3 years. Backlogs increased though, while prices surged on unprecedented supply chain disruptions. European PMIs came in much better than expected as well, returning to manufacturing growth for the first time in 6-months. The services sector remains in contraction, hampered by the COVID-19 related lockdowns.

Week Ahead

Month- and quarter-end flows hang over the market this week. The shortened holiday week features a docket full of Tier 1 economic data. Revisiting Friday’s bewildering market movement is critical. Shares of some media and technology companies were cut down significantly. Weekend reports tie this to an over-levered fund’s liquidation. The technology-heavy Nasdaq’s ability to rally sharply in the face of higher yields seems notable too. As the calendar turns, April offers investors a potential seasonal tailwind. Historically, it’s been the strongest month for the S&P500, higher 74% of the time since 1964 by an average +1.7%. Rebalancing could create a few speedbumps though.

Over the last 3 months, 10-year yields have risen 74 basis points, while the major U.S. equity indices have climbed modestly. The S&P 500 and Nasdaq Composite are +5.82% and +1.92% respectively, but equal weight S&P500 is +11.52% as the median stock has performed better than the market-cap behemoths. The monthly jobs report is on Friday, but markets will be closed in observance of Good Friday. Next Sunday’s futures opening could be chaotic as global investors react to our labor market situation, but they also may place more weight on the ADP report mid-week. Both are expected to show solid job creation, but the Fed remains focused on the slack in the labor sector, which is illustrated through the underemployment rate. Tuesday’s consumer confidence is poised to jump sharply given the stimulus deployment and vaccine progress.

Year-to-date index performance; Dow up 8.06%, S&P up 5.82%, and Nasdaq up 1.94% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Rising Yields and Impact for your Money

jim Economy, Financial advisor, Market Brief, Market Commentary, Market Outlook, Market Review, Stock Market , , , , , , ,
rising yields

Treasury yields rose significantly over the course of last week. The rising rates spooked equity investors, reaching the highest levels since February 2020. And the highest one month gain since November 2016. Yields ended the week down from the high on Covid-19 vaccine optimism, a recovering U.S. economy, and massive stimulus deal near completion. For the week, major indexes finished down; Dow down 1.9%, S&P down 2.41%, and Nasdaq down 4.9%.

Rising Yields

The high yields lead to concern for inflation. With inflation, comes demand for higher yields. Higher yields are passed down to corporations by way of borrowing. If companies have debt or increase their debt, than in return, they will pay higher interest payments. Higher interest payments cut into their profits, therefore, companies report lower earnings and their overall valuation declines. Rising rates are not all doom and gloom. Fed Chairman Powell made this statement regarding higher yields last week, “statement of confidence on the part of the markets that we will have a robust and ultimate complete recovery.” Regardless, interest rates remain the focus of market stress going forward.

Week Ahead

Last week, U.S. jobless claims of 730K were lower than expected, and lower than the previous week. The Johnson & Johnson vaccination news helped travel stocks jump. The J&J vaccine approval increases the push to vaccinate 100m people in the U.S. by the end of June. Further supporting the recovery and investor perception of a likely economic boom. Housing report data was strong. The House passed President Biden’s $1.9T relief package over the weekend. Despite the rising rates, this is all positive news to support the market. For the year, Dow is up 1.06%, S&P up 1.47%, and Nasdaq up 2.36%.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

Financial Advisor Erie CO focus on investments, wealth management, retirement planning in Boulder, Louisville, Niwot, Lafayette, Windsor, Berthoud, CO

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

How Quickly Will the Economy Recover

jim Economy, Financial advisor, Investing, investment strategy, Market Brief, Market Commentary, Market Outlook, Market Review, Retirement Planning, Stock Market, wealth management , , , , , , , ,
economic recovery

Now that the great short-squeeze has lost most of it’s air, it’s back to business as usual. The indexes shook off the weak job numbers and are looking ahead to the economy recovering and growing. Last week all indexes finished up.

Last Week

January jobs created less than 50,000 new jobs. On the positive side, unemployment fell from 6.7% to 6.3%. The number of Americans filing for unemployment also declined for the 3rd straight week. Most of the Nasdaq’s gains were attributed to good earnings reports, surpassing estimates. And the volatility index dropped back into the 20’s, calming the fears of an immediate 2021 correction. Readings from the ISM report were above 50, signaling expansion. This is good news when trying to grasp how quickly the economy will recover.

The Week Ahead

The economy is continuing to recover, both at home and abroad, as vaccination efforts spread. When a stumble comes, fiscal and monetary policy will undoubtedly offer an arm to stabilize or stand up. That remains supportive to equities, government bond yields, and credit markets. Roughly 59% of the S&P500 has reported earnings, and 81% have beaten EPS estimates. Per FactSet, the blended EPS growth rate is +1.7% y/y versus December 31’s estimate of -9.3%. For now, investors will continue economic implications of the race between widespread vaccination and virus mutation, the resumption of consumption, and the likelihood of higher prices or inflation across the economy.

Total after tax income was up 7.2% in 2020, the most in any year since 2000. Right now, there is plenty of demand for goods. Incomes and savings are up year-over-year. While production is not. It is supply that is hurting. The perfect recipe for inflation. A very real threat to the long-term health of the US economy. This we will keep an eye on. Year-to-date index performance; Dow up 1.77%, S&P up 3.48%, and Nasdaq up 7.51% through the close on Friday.

Have a safe week!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.