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Market Commentary 05-14-2021

Clint Carpenter, Director of Operations

The markets have certainly ebbed and flowed as of late, but we’re still positive year-to-date in our main indices. The S&P 500 is at 4,110, up about 9.5% for the year, the DOW is just over 34,000, which is a YTD gain of 11%, and the star of last year, the NASDAQ, is only up about 2% so far this year, at about 13,100.

Treasury yields have come back down a bit since you last heard from us in April - the one-year is paying .05%, the 10 is yielding 1.6% and the 30-year is at 2.4%. The average 30-year mortgage will cost you 3% APR today.

WTI Crude is down to about $63/bbl, gold will cost you $1,826 per ounce and silver is at $27.

Kris Venezia, Market Analyst

I want to dig into what I have been finding as I go through through corporate earnings reports. We're in that window where companies give us their perspective on how they're doing. Corporate executives also take questions on what they see ahead which is helpful.

I won't dig into the nitty gritty, but I want to talk about the main general topics I have found as I look through these reports.

The big immediate takeaway is that earnings have really crushed expectations. We have seen a majority of companies report profits and revenue that was way better than anticipated to start the year. It tells us that the economy is coming back quicker than what was expected by a lot of analysts.

U.S. and Asia are doing better than Europe. Is this a surprise? No, but it is incredible when companies like Coca-Cola and McDonalds show how much Europe is lagging in its recovery.

The consumer is strong. Companies like Chipotle, Domino's, Apple and Amazon all highlight this as they report consumers not just buying from them, but spending more than they did in the past. People aren't just getting pizza, they're splurging on that cheesy bread too.

There are supply chain issues persisting. The car industry is the best example of this with Ford saying they're being forced to make less cars because of shortages of items like chips.

Daryl Eckman, President

Inflation seems to be on everyone's lips right now. We have been getting a number of phone calls from people asking us what we think about inflation.

I'm not going to spend a lot of time on inflation because I went through it on our last podcast. You can find it on our website if you want to get my opinion on inflation.

We are seeing issues with the supply chain. The semiconductor industry is working to deal with a shortage there that is impacting businesses.

I want to discuss market volatility. We actually like volatility because it gives us buying opportunities. Our clients hear this on a regular basis. Volatility gives us conviction to do some of the buying; honestly, we do not love buying when things are high. When the market performs really well, we tend to look for opportunities to take some money off the table.

We also are good at controlling our emotions when volatility comes up. It can be difficult to emotionally handle volatility and that is one of our strengths.

Bottom line, we want to use the volatility as an opportunity to find buying and selling opportunities. If you want more clarification on volatility, please reach out and we can go into more details.

Clint Carpenter

To wrap us up here, I thought I would touch just briefly on something that, second maybe to inflation, I’ve been receiving the most questions about - which is Biden’s plan to offset more than $4 trillion in spending proposals with higher taxes.

Specifically, we’re talking about the $2.3 trillion “jobs and infrastructure” package announced last month, as well as the $1.8 trillion “families” spending plan. The first and larger bill, it is proposed, will be paid for entirely by a hike in the top corporate tax rate from 21% to 28%- this was just cut down from 35% in 2017.

The second “families” bill, is planned to be funded by increasing enforcement at the IRS and by raising taxes on high-income Americans and investors. Namely, Biden’s proposal is to approximately double the amount of capital gains taxes paid by investors who earn more than $1MM annually - they say only about .3% of investors would be affected by that change.

Clearly, these proposals are brand new and will work their way through committees and negotiations with both parties, and we’ll end up with an entirely different version of the bill later. We’re paying very close attention to it, but there is little sense in reacting strongly now while it is still in its infancy. These types of bills, especially in today’s political climate and congressional stalemates are huge battles. So, know that we follow every detail of it, but can’t say what will ultimately pass through.

Thanks as always for listening today. If you’d like to discuss anything further about the earnings season, inflation, or these tax proposals, please don’t hesitate to give us a call or shoot us an email. Thanks and have a great day!


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