Over the past week markets continued to trade in a tight range with an upward bias. At one point midweek the Dow fell 500 points briefly on fears that economic growth may be “transitory” but this was quickly overcome by optimism and as a result the Dow finished the trading week higher by 0.24% to trade just below the 35,000 level. All major indexes are knocking on the door trying to gain entry to new highs.
The Economy and Earnings
Second quarter earnings are upon us. Gurus are expecting the profits of companies which comprise the S&P 500 to be up 65% from the same quarter a year ago as the rebound from the pandemic is in full swing. The big US banks will report earnings this week and they are expected to report solid bottom line numbers thanks to falling loan defaults allowing them to pull cash from loan loss reserves. Analysts on Wall Street however are worried that revenue growth will be down about 5% with soft loan growth and a drop in trading profits. Regardless of how it turns out the banks have solid balance sheets and are starting to reward shareholders with increased dividends.
Last week the Chinese Central Communist Party cracked down on several tech firms like recent IPO Didi in a move that shook investor confidence and added to market uncertainty. China’s central bank has expressed concern about weak stock markets and a sluggish consumer recovery and as a result cut its reserve requirement by 50 basis points in an effort to bolster the covid recovery.
Airbus said it had delivered 297 new airplanes in the first half of 2021 up 52% from last year. Meanwhile Boeing delivered about half that level due to quality control issues. In terms of orders however Boeing is outpacing Airbus with 165 gross orders and 38 net new orders after cancelations from Aeromexico and Norwegian Air Shuttle both of which went belly up. This offset large orders from Alaska, Southwest and other carriers. At last count Airbus had net orders this year of negative 31 but still boasts an backlog 40% larger than Boeing’s current backlog of 4,121. With a higher delivery rate Airbus is cash flow positive and not burning through cash like Boeing.
Items of Interest
Troop 100 had a successful summer camp at Camp Parsons. The troop received honor troop awards for participation and a robust spirit of enthusiasm. Next up on the activities list are several hikes into the Cascades and a trip to the famed scout camp Northern Tier in Minnesota.
The Washington State Long Term Care Trust Act is sparking more businesses and organizations based in the Washington to notify employees of the pending tax which takes effect January 1, 2022. If you have a private long term care plan in place by the end of October 2021 you can opt out of the tax but the rush of people to get a policy is causing delays in medical exams and several carriers are pulling policy offerings or putting restrictions on new business in an effort to prevent people from buying a policy only to cancel it once they are exempt from the tax. Please call us if you have questions regarding long term care insurance and the Washington State LTC Trust Act.