Here’s the weekly rundown
Weekly Summary:
Ever have a hot and cold friend that leaves you waiting and wondering? ..Cough, cough welcome to the second full week in September.
For the most part, the major indexes (S&P 500, Dow, Nasdaq) opened almost every day this week higher only to end the day lower. Building the confidence of investors in the morning then taking it away.
So what’s the deal with the market’s mood swings?
Mixed signals.
Particularly, some slightly better than expected economic data in the backdrop of building supply chain and inflation issues for companies.
The better than expected numbers started Tuesday with the consumer price index (consumer inflation) increasing .1% less than expected to 5.3%. This pumps the breaks a bit on the worry that the Fed will be forced to increase interest rates and destroy demand for homes, cars, and basically anything people borrow money to buy.
Then Thursday, the better than expected economic data gets even better with retail sales increasing .7% vs the expectation of a .8% decrease -i.e. consumers are still here to buy!
Normally, these headlines of “better than expected” would shoot the market higher. ?
But they didn’t!
At least not for long as the backdrop we painted last week, supply chain constrictions, and increasing raw costs, remain the prevailing key to whether companies will be able to continue to increase earnings and hence increase stock prices. So far, these conditions have not improved making it hard to justify the market moving higher.
What’s up with China – Real Estate
More crackdowns. This week it’s real estate.
Ever hear of Chinese “ghost cities”? These are empty cities in China built up by developers speculating on property values and the idea that if you build it they will come. Couldn’t be any problem with this right?!
For a long time, China’s government has been saying “homes are for living in” yet easy money policies didn’t give any reason for the developers to slow. However, over the last year, Xi’s regulators have clamped down by limiting banks on the amount of exposure they could have to real estate and prohibiting indebted developers from new debt.
The result, this year alone developers have defaulted on more debt than in the last 12 years combined and national home sales have fallen by over 19%.
The point, China is currently not a safe place for American investment ex. Alibaba YTD Chart.
The Major Headlines:
? Civilians Take on Space
Almost like October Sky four mainly average people successfully ventured to an orbit 350 miles above earth (further than the Hubble Space Telescope) late Wednesday night. The mission is being operated by none other than Elon Musk’s SpaceX. –See Article
? Gavin Newsom Stays in Office
Not going anywhere..California’s Gov. Gavin Newsom (D) easily fended off a recall attempt Tuesday winning 66% of the vote. However, if Californians had chosen to remove Newsom, conservative radio personality Larry Elder (R) would’ve won after receiving the most votes on who should replace the current governor.
The recall, which initially had little support, gained major traction after photos emerged showing the governor out to eat at an upscale restaurant at the same time he was forcing many Californians to stay home and close their businesses.
2022 is the next California gubernatorial election. –See Article
? Apple’s “New” Phones and Accessories
More battery, please! That pretty much sums up Apple’s new product reveal from Tuesday along with a few other minor tweaks.
The new products:
- Updated iPad & iPad mini –faster processors and improved cameras for zoom
- Series 7 Apple Watch -20% larger screen
- iPhone 13 lineup -1.5 to 2.5 longer battery life and small camera improvements
Apple shares are down on the week. –See Article
? Higher Taxes…The Details
Could you get the bill? This week House Democrats unveiled their proposal to increase taxes in order to pay for $3.5 Trillion in new spending. What’s all in the plan?
- Corporate tax increase of 5.5% taking the rate to 26.5%
- Top rate for capital gains would increase from 20% to 25%
- Top marginal tax increase of 2.6% taking the rate to 39.6%
- Additionally, the Senate’s plan includes details to end in-kind redemption for ETFs – this means that ETFs owners would be subject to capital gains distributions similar to Mutual Fund owners.
Ultimately, there is a long way to go before the true details are finalized. –See Article
And with that, have a good weekend!
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