Two weeks ago the Dow pulled back over 3% and last week the Dow rallied 3.4% or roughly 1,143 points to “get back to normal”. Today the Dow traded down 150 points to close at 34,283 on lighter trading volume. IBD still have markets listed in rally mode and the good folks at BTS have a positive reading for markets as well. The Dow is up 12.5% year to date through Friday.
The Economy and Earnings
All 23 systemically important banks passed the federal stress test with flying colors which means banks and financial companies could be on the cusp of huge increases in shareholder payouts. The results give the Federal Reserve the green light allow increases in dividends and stock buybacks which should soon be announced. Some gurus are predicting dividend payouts increasing 10% on average or more.
The White House and Congress seem to have reached a bipartisan infrastructure deal. While it still needs to get through the House and Senate the plan calls for a total investment of $1.2 trillion smackers over 8 years. Some highlights by sector: transportation ($579B) Roads, bridges ($109B), EV infrastructure ($7.5B), broadband ($65B) Power infrastructure ($73B). Companies in these sectors popped on the news but there is some concern about inflation since firms that do the work do not appear to have made plans to meet these needs. The plan will be paid for by repurposing federal funds with no tax hikes on the table. One thing to be aware of is that one of the ways to pay for this will be to enhance the tax law enforcement from the IRS. This means all those slackers out there need to find a good CPA. Time will tell if this passes and in what form since some in Congress will likely try to add spending and tax items which others will oppose.
Bitcoin lost ground last week after China cracked down on Bitcoin miners by telling utilities to stop providing power to these crypto miners who are consuming vast amounts of electricity in their quest for digital wealth. China also does not like the decentralized nature of Bitcoin and prefer their own centralized digital currency.
Items of Interest
The deadline for getting an exemption from the Washington Long Term Care tax is approaching and more people are becoming aware of the law, its tax implications and looking into long term care insurance as a result. 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 is getting backed up with the increase in demand. One estimate we heard was that exams are running a month behind. Some large outfits like the Washington State School system, City of Seattle and Matt’s Hot Dog stand are informing employees about the law and these employees are looking onto LTC insurance. 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.