Market Update November 15, 2021
Patrick Traverse CFP? EA CEPA?
Owner Founder at Breakaway Financial Group LLC
Dollar capitalizes on hot inflation report, markets quiet down amid US holiday
What is it??
“The greenback capitalized on surging US Treasury bond yields and risk-aversion on Wednesday after the data from the US showed that consumer inflation jumped to its strongest level in more than 30 years.”*
“The US Bureau of Labor Statistics reported on Wednesday that the Consumer Price Index (CPI) jumped to 6.2% on a yearly basis in October from 5.4% in September, marking the highest print since 1990.”*
“Inflation fears weighed heavily on stock markets on Wednesday. The Nasdaq Composite fell more than 1.5%, the S&P 500 lost 0.8% and the Dow Jones Industrial Average was down 0.66% by the closing bell.”*
Simply, on Wednesday the value of the U.S. Dollar was higher, along with the U.S. Bond yields, and inflation data. On the same day, U.S. Equities were down.?
Why does it matter?
“Gold found demand as an inflation hedge after the US CPI data and reached its highest level since June near $1,870 before going into a consolidation phase.”*
As some parts of the economy accelerate to all-time highs they may become overbought or lose momentum. We will pay attention to where money starts to flow as an indicator of what may begin to perform better.?
Analyzing Biden’s New “American Families Plan” Tax Proposal
What is it?
“Democrats on the House Ways and Means Committee released their tax proposals on September 13… and the measures are very different from what many expected! The legislation touches on a wide range of tax issues, from increasing the top ordinary income tax bracket to cracking down on popular retirement account strategies and bringing the estate and gift tax exemptions back to pre-2017 levels. Notably, though, the proposals do not include some rumored measures, such as equalizing the top ordinary income and capital gains rates or eliminating the step-up in basis.”**
“the taxpayers who will be most impacted by the new rates are those in the $400,000–$500,000 income range, who will see themselves move from the current 35% bracket to the new 39.6% bracket.”**
Why does it matter?
The Senate voted on only a portion of the Building Back Better bill a couple of weeks ago. The vote was towards the infrastructure portion of the bill. Committees are still working on the American Families Plan and may be ready for a vote soon.
Some of the initial items of the bill would affect many of our clients and may change some of the tax planning strategies we have implemented in the past, including this year.
We will give you an update on any further developments.
Other articles I found interesting this week:
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Our last portfolio reallocation: 10/11/2021.?
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The weekly market update provides a window into the process we use in our investment management process. At MoneyCoach, we believe markets are always changing and require a nimble yet data-oriented approach.?
Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.
Sources:
*Eren Sengezer. “Dollar capitalizes on hot inflation report, markets quiet down amid US holiday”. 11/11/2021. FX Street. https://www.fxstreet.com/news/forex-today-dollar-capitalizes-on-hot-inflation-report-markets-quiet-down-amid-us-holiday-202111110723
**Jefrey Levine, and Michael Kitces. “Analyzing Biden’s New “American Families Plan” Tax Proposal”. 11/11/2021. Kitces. https://www.kitces.com/blog/biden-american-families-plan-bill-proposed-increase-tax-capital-gains-retirement-reform/
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