Private Client Group

September 20th, 2021

U.S. Consumers Resilient, Tax Hikes Planned, Asian Restrictions Hit Supply Chain

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In today’s Steady Investor, we take a look at key factors that we believe are currently impacting the market, such as:

U.S. Consumers Prove Resilient – The Delta variant threatened to stall the U.S. economic recovery in July, as consumer spending ticked lower while inflation kept moving higher. But U.S. consumers proved resilient – in August, retail sales rose 0.7%, according to the Commerce Department, as spending rose in categories like groceries and merchandise at big box stores. The uptick in spending was fueled in part by schools and college campuses reopening, with steady spending in furniture and hardware. The tight car market saw purchases ease, as consumers may have been turned off by rising prices and limited supply. Some of the U.S.’s largest retailers are anticipating more issues with supply chains heading into the holiday shopping season, and some like Best Buy and Target are working to amass large amounts of inventory compared to previous years and marking double-digit increases from 2020. Inventory re-builds can carry a significant impact on GDP numbers, which will be worth noting for Q3.1

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There are many events that could affect the future of the market – whether it’s another COVID-19 variant or economic restrictions and inflation. In such volatile times, the key is not to panic but to find a way to navigate market volatility.

If you have $500,000 or more to invest, get our free guide, “Using Market Volatility to Your Advantage,” and learn our insights, based on decades of experience, about how a volatile market may be able to help investors refine their strategies and potentially generate solid returns over time.
 
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Are Taxes Set to Move Higher? Plans for raising taxes are starting to be released by Democrats as part of a $3.5 trillion budget reconciliation bill planned alongside the $1 trillion infrastructure bill. According to early reports from staffers, the plan would increase the corporate tax rate from 21% to 26.5%, which is lower than President Biden’s goal of 28%. Investors should note, importantly, that the conversation is no longer centered around the previous 35% tax rate, which could arguably mean corporate taxes could more permanently settle under 30%. The Democrats plan would also place a 3% surtax for households with income over $5 million while also raising capital gains taxes for households earning over $400,000. According to early reports, the plan appears to scrap changes to estate taxes. These figures are by no means the final rates in the budget deal, and we expect quite a bit of debate in the weeks ahead. Meanwhile, the U.S. budget deficit narrowed to $2.7 trillion in the first 11 months of the fiscal year, as both spending and federal tax receipts hit new records.3

Economic Restrictions in Asia Ripple Through the Global Economy – Countries critical to the global supply chain continue to wrestle labor and productivity issues tied to the spread of the Delta variant. Southeast Asia still largely relies on heavy-handed restrictions to contain the spread, and it is leading to factory closures, lower production levels, and ultimately higher prices. Malaysia’s restrictions are crimping the production of palm oil, which is a key ingredient in everything from candy bars to chips and shampoo. A survey of manufacturing purchasing managers found that Vietnam, along with Malaysia and Indonesia, has seen factory activity move into contraction territory. Lockdowns in Vietnam – which is the world’s second-biggest coffee exporter – have delayed the processing and shipment of coffee beans. That has left many Western brands that rely on Vietnamese factories to see a rise in costs. The issues extend to an array of industries. Companies like Adidas, Crocs, and Steve Madden rely heavily on Vietnamese manufacturing, which delivers over 30% of U.S. shoe imports. Taken together, economic restrictions in Vietnam and elsewhere in Asia can add to an already long list of supply chain issues, from delays at ports to rising raw-material prices, and ultimately, to higher costs for consumers.4

Don’t let the negative headlines or fears of the unknown impact your investing decisions.

To give insight into ways to manage volatility, I am offering all readers our guide “Using Market Volatility to Your Advantage”5. This guide can help you learn about our insights, based on decades of experience, about how a volatile market may be able to help investors refine their strategies and potentially generate solid returns over time.
 
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If you have $500,000 or more to invest, download this free guide today by clicking on the link below.

Disclosure

1 Wall Street Journal. September 16, 2021. https://www.wsj.com/articles/us-economy-august-2021-retail-sales-delta-variant-11631736808?mod=djemRTE_h

2 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion.

3 Wall Street Journal. September 13, 2021. https://www.wsj.com/articles/u-s-budget-deficit-narrowed-to-2-7-trillion-in-first-11-months-of-fiscal-year-11631556001

4 Wall Street Journal. August 25, 2021. https://www.wsj.com/articles/delta-variant-outbreaks-in-sparsely-vaccinated-asian-countries-disrupt-production-11629807725

5 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion.


DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

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