Last week while I was on vacation the markets slumped with the Dow losing 3.45% or 1,189 points on heavy trading volume to close at 33,290. Some of that red ink was gained back today however as I have come off vacation and the Dow finished up 586 to close at 33,876. Trading volume today was lower however and the IBD indicators slipped last week from green to yellow signaling caution. Second quarter earnings reports are coming out in a couple of weeks and so far the gurus are not lowering earnings estimates at all despite fears of inflation.
The Economy and Earnings
The Federal Reserve had its latest open market committee meeting last week and signaled that rate increases are on the horizon with Chairman Powell pinning late 2023 as the target for raising interest rates. The markets reacted to this shift in policy with a sell off but what drove the uncertainty were indications the Fed is seeing stronger signs of inflation and economic growth than it had originally thought and was open to moving up its interest rate time table possibly further. While late 2023 is still a ways off the possibility of a stronger than expected domestic and global economic recovery is increasing the probability of rate increases happening sooner than expected causing investors to recalculate forward projections and rebalance portfolios.
Items of Interest
The deadline for getting an exemption from the Washington Long Term Care tax is approaching (Oct 31st) and more people are becoming aware of the law, its tax implications and looking into long term care insurance as a way to avoid the situation plus buy themselves meaningful benefits. What’s interesting is that insurance companies are concerned that individuals will sign up for a policy and then cancel it once they are exempt from the tax. Due to this they are starting to set minimum age standards and some companies are pulling LTC policy offerings altogether. Medical exams needed to get policies through underwriting are getting backed up with the increase in demand. One estimate we heard was that exams are running a month behind. Some large companies like Microsoft and Amazon are informing Washington based employees about the law and in the case of Microsoft they are offering a cheap LTC policy for a limited time period through a major insurance company. With all these points in mind it is wise not to wait until the last minute to try and get a policy if you are wanting to exempt yourself from the tax. If you have questions about this please reach out to us.