For months, wealthy U.S. taxpayers and corporations have been living with the specter of higher taxes under the Biden administration. It is a pretty good bet that taxes will go up, but not as much as you might expect. Throughout the week, Democrats in the House and the Senate have been horse-trading over the amount of spending, versus the amount of taxes, necessary to pay for President Biden’s $2.3 trillion budget plan. Republicans are already on record that they will oppose any new tax hikes at all. Since the Democrats hold such a slim majority in both the House and…
Insights & Advice
Tag: Biden administration
McConnell praises Biden
“Human sacrifice, dogs and cats living together … mass hysteria!” —Dr. Peter Venkman In a surreal turn of events, Senate Minority Leader Mitch McConnell (R–KY) praised President Biden (D) for his role in getting the Senate to pass the $1.2 trillion infrastructure bill. The legislation is called the Infrastructure Investment and Jobs Act (aka The Act). Keep in mind, McConnell had previously been vocal about stopping the Biden administration’s agenda. But infrastructure spending is typically favored by both sides of the political aisle. Talk of a bipartisan infrastructure deal has been occurring for years. It’s closer to law than it’s ever been before….
Want equality? Start with better jobs
Jobs. They are the primary focus of the Federal Reserve Bank, the Biden Administration, the Republican opposition, and most U.S. corporations. Supposedly, with all this high-powered attention, we still can’t find enough workers to fill all the positions available. Has anyone questioned why? One important reason might be that 60% of jobs in the U.S. are considered “mediocre” or “of poor quality,” according to a recent Gallup survey. If you combine those findings with the fact that many workers in the service economy are poorly compensated, the problem begins to come into clearer focus. If you listen to the free…
The taxman cometh
“Let me tell you how it will be; there’s one for you, nineteen for me.” —The Beatles The U.S. stock market can perform well even when U.S. corporate taxes rise. I’ll get to that in a moment, but let’s not bury the lead. Increasing corporate tax rates feels like old news compared to President Biden’s newly released details on paying for his proposed American Families Plan. The White House proposes nearly doubling the capital gains tax rate from 23.8% to 43.4% (including an existing 3.8% surtax) for people earning more than $1 million per year. That would be higher than the current…
Stocks hit with possible tax hike
It was a losing week for stocks. Most of the blame can be pinned on a proposal by the Biden Administration to double the capital gains tax on investments. It is not official yet, but investors are counting on an announcement next week. Before you hit the sell button on all those huge capital gains you have accumulated over the last few years, know the facts. Right now, there aren’t any. What we do know is that Joe Biden ran his winning presidential campaign on increasing taxes on the rich and on corporations. He plans to do just that, so…
A highway of opportunity
Most Americans seem excited and hopeful about the prospects for the Biden Administration’s infrastructure plan. Local politicians as well as their construction buddies are salivating at the possible promise of getting their share of this multi-trillion-dollar prize. But looking beyond the pork barrel, we might want to consider how innovation and technology could help America regain its first-class status in infrastructure. As of 2019, the United States is ranked 13th in the quality of its infrastructure, after countries like Singapore, Japan, Germany, and the United Kingdom among others. Of course, it may not be a fair comparison since the U.S….
Will infrastructure spending boost clean energy stocks?
Renewable energy stocks were all the rage last year. This year, however, not so much, with clean energy funds taking hits of between 25-50%. Will President Biden’s proposed $3 trillion infrastructure bill breathe new life into this sector? President Biden ran on a platform that included the build out of an infrastructure plan that would “achieve net-zero emissions, economy-wide, by no later than 2050.” By the time of his November election last year, investors had bid up the clean energy sector, which includes everything from electric cars and clean water to solar and wind power, by over 200% in some…
CAPITAL IDEAS: What a year
“It was the best of times, it was the worst of times … it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” — Charles Dickens The year 2020 was dreadful. Our neighbors, friends, and family lost jobs as the economy struggled with COVID-19. Tragically, some of us lost loved ones to the virus. I keep those losses in mind as I review the year for the stock market. My intention isn’t to spike the ball in celebration of how well the stock market performed. Instead, it…
Cross currents confuse investors
You would think that with a $1.9 trillion spending package, an increasing rate of coronavirus vaccinations, and a potential $3 trillion infrastructure package waiting in the wings, the market would be at record highs. The fact it is not should tell you something about the indecision plaguing investors. When good news fails to impress, it usually means stocks (or at least some stocks) are headed lower. That should come as little surprise to readers. I advised investors to raise cash last month in preparation for what I see as a buying opportunity this month. The challenge: when do you put…
CAPITAL IDEAS: Do you have excess savings?
The U.S. Gross Domestic Product (GDP) has almost recovered from its pandemic loss. According to JP Morgan, the last GDP calculation was merely 1.3 percent less than its February 2020 peak. According to the Atlanta Fed’s GDPNow forecast, the U.S. economy will surpass its pre-COVID-19 peak this quarter. With the caveat that we’re only about two-thirds of the way through and anything can happen in a month (remember March 2020?), the Atlanta Fed’s model currently forecasts a 9.6 percent growth rate of GDP for the first quarter of 2021. Unfortunately, that sounds better than it is. The official unemployment rate of 6.3…
Higher interest rates clobber stocks
In the grand scheme of things, a small, upward blip in the yield of the U.S. ten-year Treasury bond should be of little concern to equity investors. But sometimes, when the conditions are ripe, even the tiniest spark can cause a conflagration within a speculative stock market. As readers are aware, interest rates have been trading at historically low levels for some time. The onset of the Coronavirus forced our Federal Reserve Bank to pin them even lower. Essentially, it is why the stock market has been having such a great run. Investors have been conditioned to just assume that,…
Stocks regain momentum
What a difference one week makes! Stocks recouped all their losses this week, and then went on to make new highs. The outcome of President Biden’s proposed stimulus bill will determine the market’s next move. Let me set the record straight. Last week, I wrote that I expected stocks to stumble, hopefully preparing readers for a possible decline of 10-15%. That was a mistake. Instead, traders bought last week’s 3% dip, and, at this point, we are now back to square one. Well, not quite. The U.S. dollar, the Ten-Year U.S. Treasury Bond, and the price of gold have all…
A roller coaster market
Investors learned several lessons this week. First among them was that stocks, on occasion, can go down as suddenly as they can go up. We also began to realize that it may take longer than expected before this pandemic is put to rest. During the last two weeks, I have been warning investors to shuck those rose-tinted glasses and take a more realistic view of exactly where we are in this pandemic-relief world. That advice is starting to sink in. This week, the Biden Administration, Chuck Schumer, the Senate Majority leader, and even Dr. Anthony Fauci, the nation’s top infectious-disease…
Equities register more new highs, until they don’t
New highs are getting so common that investors are disappointed when markets fail to achieve them at least weekly. That should tell you something about the future direction of stocks, at least in the short term. As investors piled into stocks again this week in anticipation of unending spending by the federal government, it might be time to take a few profits. Don’t take that statement the wrong way. I am not calling for an end to this run-up in stocks. I think we could kiss the 4,000 level on the S&P 500 Index before we face a really big…
We ain’t normal
After watching the catastrophe at the U.S. Capitol building last week, it’s clear to me that we ain’t normal. But that’s not the only way to measure our lack of normalness. According to the CNN Business “Back-to-Normal” index, we ain’t normal. The Back-to-Normal index represents how close the U.S. economy is to returning to its pre-pandemic level. As I write this column, the index tells us that the economy is operating at 75 percent of where it was in early March 2020. The index was hovering around 83 percent for most of October 2020. Since then, it has been trending downward….