Zacks Investment Management

In today’s Steady Investor, we dive into current news and key indicators in the market that we believe investors should consider, such as:

• Businesses are flush with cash and credit
• Corporations and municipalities test mandates as the Delta Variant surges
• SEC plans to regulate cryptocurrency
• Possible replacement of the Fed Chairman

Businesses are Flush with Cash and Credit – At J.P. Morgan and Bank of America, there is nearly $1 trillion in unused corporate credit, which is up 20% over the last year and marks a record for both banks. The trend of corporate clients asking banks to increase credit lines has been taking place over the last few months, even as many of the biggest corporations are flush with cash. Bank executives say that corporations are gearing up for a time when supply chain issues and labor shortages clear, so they can tap credit lines to fuel the next phase of growth. J.P. Morgan conducted surveys to find out what is driving corporate interest in credit and found that business confidence is at its highest level in 11 years with a full 46% of businesses saying they intend to ramp up capital spending later this year. 38% of businesses also said they would need to increase their credit lines with time, signaling that rising business spending could drive the next leg of the economic expansion.¹

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As the Delta Variant Surges, Corporations and Municipalities Test Mandates – The pandemic continues in the U.S., with the Delta variant in a sustained uptrend and hospitalizations on the rise. But the economic fallout may be contained, as corporations and municipalities have adjusted to dealing with previous waves and as many are testing using mandates versus outright lockdowns or restrictions. There are several examples playing out across the U.S. economy. General Motors, Ford Motor, and Stellantis (the maker of Jeep and Dodge) have reinstated mask mandates for all factory and office workers, regardless of vaccination status. Stanley Black & Decker has done the same. Tyson Foods has gone even further, saying it would require vaccinations for its entire U.S. workforce. Then there are states and municipalities staying open while reinstating masking indoors (Louisiana, LA county), and the case of New York City which will require people to show proof of vaccination for indoor activities like dining, gyms, and events with large groups.³

The SEC Plans to Regulate Cryptocurrency – The Securities and Exchange Commission released some strong language this week aimed at the cryptocurrency markets. SEC Chairman Gary Gensler referred to the crypto markets as full of “fraud, scams, and abuse,” and he pledged to use all of the SEC’s authority to regulate markets as much as possible. Mr. Gensler’s statements are a clear signal that the SEC is poised to increase scrutiny of crypto trading and the platforms that facilitate it. Also announced this week is the idea that using cryptocurrency for purchases could constitute a sale that is subject to capital gains, which could muddy its future as a medium of exchange.⁴

Could the Fed Chairman Get Replaced? Jerome Powell has been the head of the Federal Reserve for four years, but his term expires in February 2021. The question that lies before President Biden is whether he will extend Powell’s term or nominate a Fed chair of his own. There have been few criticisms of Powell’s handling of the economic crisis, and he has largely been a skilled communicator and policy setter at the Fed. But some progressives argue he has been too lax on bank regulation, and some are posturing to replace him with a Fed governor who may take a tougher stance on Wall Street. One name that has surfaced recently is Lael Brainard, who has dissented on many of Mr. Powell’s decisions to ease bank rules.⁵

The Delta Variant is surging—what does this mean for the market? To protect your investments from the unknown, we recommend finding the right investment strategy that can make a huge difference when managing market volatility. To help you learn more about strategies that cater to different investment objectives, we have created our Dean’s List of Investment Strategies.⁶

Our Dean’s List describes four of our investment strategies that are ranked in the top of their respective classes, according to Morningstar (as of 6/30/21).⁶ If you have $500,000 or more to invest and want to learn more about these strategies, click on the link below to see how they could potentially benefit you.

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