MARKET INSIGHTS FOR NOVEMBER 29, 2021

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News of a new, highly virulent COVID variant triggered a market sell-off on Friday, sending stocks into negative territory for the week.
The Dow Jones Industrial Average slid 1.97%, while the Standard & Poor’s 500 slumped 2.20%. The Nasdaq Composite index lost 3.52% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 1.68%.1,2,3

Red Friday
Investors woke up on Black Friday to reports of a mutated COVID variant, reviving fears of potential new economic restrictions. U.S. markets were not alone, as stock prices in Europe and Asia also tumbled.

Friday’s market action saw declines in economic reopening stocks, such as travel and leisure, cyclicals, financials, and energy, while some of the so-called stay-at-home stocks and pharmaceutical stocks experienced gains. Yields retreated amid a flight to safety and the potential that this turn of events may lead to a slowdown in the Fed’s bond tapering program and a delay in contemplated rate hikes. Prior to Thanksgiving the markets had been choppy, but largely trending higher for the week, while yields had moved up with the renomination of Fed Chair Powell.

Powell Renominated
President Biden announced last week that he was renominating Jerome Powell to serve another term as chairman of the Federal Reserve Bank, ending market speculation surrounding his renomination.

President Biden cited the need for stability and independence in a time of uncertainty in making his decision. While Powell’s renomination faced resistance, Senate approval appears likely. Coincident with Powell’s renomination, President Biden also nominated Lael Brainard, a member of the Federal Reserve Board of Governors, to serve as vice chair. Investors can soon expect further Fed nominations by the Biden Administration to fill vacancies created by term expirations and retirements.

1. The Wall Street Journal, November 26, 2021
2. The Wall Street Journal, November 26, 2021
3. The Wall Street Journal, November 26, 2021

Market Insights November 15, 2021

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Stocks posted small declines last week as investors digested recent stock market gains and an unexpectedly high inflation read.

The Dow Jones Industrial Average slid 0.63%, while the Standard & Poor’s 500 retreated 0.31%. The Nasdaq Composite index slipped 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 0.78%.1

MARKET TAKES A PAUSE
After moving higher on Congressional approval of a $1 trillion-plus infrastructure spending bill, stocks drifted lower as investors took a breather after a weeks-long run-up in prices. A high October inflation report on Wednesday sent bond yields higher and stock prices lower, especially technology and other high growth companies. Energy also fell.4,5

Higher-than-expected inflation elevated investor worries that the Fed may be forced to accelerate its bond tapering schedule and hike interest rates sooner than planned. Stocks found firmer footing following the inflation-related sell-off, closing the week on a strong note, though it wasn’t sufficient to keep stocks from ending the week in the red.

HOT! HOT! HOT!
Rising prices appear to be showing no signs of moderating. The first reading on inflation was Tuesday’s release of the Producer Price Index, which saw wholesale prices rise 0.6% in October and register an 8.6% increase from 12-months ago.4

A day later the Consumer Price Index came in above consensus estimates, with prices climbing 0.9% from September 2021 and increasing 6.2% year-over-year. The 12-month increase was the sharpest such rise since 1990. The 12-month core inflation rate (excludes the more volatile food and energy sectors) was 4.6%, the fastest pace since 1991.5

1. The Wall Street Journal, November 12, 2021

2. The Wall Street Journal, November 12, 2021

3. The Wall Street Journal, November 12, 2021

4. CNBC, November 9, 2021

5. The Wall Street Journal, November 10, 2021

When Bad News is Good News

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Financial markets can be challenging to understand. But when markets enter a “bad news is good news” cycle, it becomes even more difficult to follow along.

At its November meeting, the Fed outlined its plan to taper monthly bond purchases, which will end this pandemic-era policy response by July 2022.1 Bad news, right? The bond purchases were one of the ways the Fed supported the economy. Stopping the program would be like removing the punchbowl just as the party was getting going.

Not so fast. This time around, the financial markets said that bad news was good news. Ending the program signaled that the Fed had confidence in the economic recovery, and it no longer needed to support the financial markets.

But just a month ago, the bad news was still bad news. The financial markets hit a rough patch in late September after the Fed said it was preparing to reduce its bond-buying program as soon as November.2

If you have been investing for any period of time, it should come as no surprise to hear that the financial markets changed their mind. So remember, we’re here to help you keep focused on your investing goals while the financial markets sort out what’s good news and what’s bad.

1. CNBC.com, November 3, 2021
2. WSJ.com, September 29, 2021

VETERAN’S DAY – NOVEMBER 11, 2021

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VETERAN’S DAY NOVEMBER 11, 2021 -THANK YOU!

As the nation celebrates Veterans Day, take a moment to recognize and thank the veterans in your community. In every field, every business, veterans help America thrive.

Proposed Changes to Estate Taxes

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To help raise revenue to pay for President Biden’s Build Back Better Plan, Congress is considering a number of tax law changes, including adjusting estate taxes.

One of the proposals would reduce the estate tax exemption to anywhere between $3.5 and $5 million, with an effective date of January 1, 2022. Another proposal would bring new rules to grantor trusts, including a change to how life insurance held in a trust would be taxed.1,2

At this point, many ideas are being evaluated, but nothing is final. Corporate tax rates, individual tax rates, and capital gains taxes are also on the negotiating table.

For now, the federal estate tax exemption remains at $11.7 for 2021, with a married couple having a combined exemption for 2021 of $23.4 million.3

But it wouldn’t be a surprise if the estate tax law changed as part of the overall plan. In 2019, 2,570 taxable estate-tax returns were filed, and they owed a combined $13.2 billion. Lowering the estate tax exemption to $5 million would raise an estimated $52.3 billion over five years.1

As difficult as it may be, the best approach is to wait-and-see. It would be hasty to make any estate changes based on current discussions.

But if you’re feeling unsettled as Congress continues to work on these changes, please reach out. Estate strategies often need adjustments as tax laws change, and it’s best to be prepared for a range of potential new rules coming out of Washington.

1. CNBC.com, September 29, 2021
2. FA-mag.com, September 22, 2021
3. IRS.gov, October 25, 2021