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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What Should You Do in a Volatile Market?
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.
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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
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You’ll get our ideas on:
If you have $500,000 or more to invest, download this free guide today by clicking on the link below.
Disclosure