Sean Dowling Awarded ‘Five Star Wealth Manager’
We are delighted to announce that Sean Dowling has once again been named a Five Star Wealth Manager by Westchester Magazine. The Five Star award recognizes those professionals who have demonstrated their commitment to clients, strong industry credentials, and the highest quality of service.
Please join us in congratulating him!
It wasn’t just the price of pork chops.
Last week, as investors weighed the news, strong corporate earnings were offset by higher grocery prices and rising numbers of global coronavirus cases.
Solid Corporate Earnings Weighed Favorably
So far, 25 percent of the companies in the Standard & Poor’s (S&P) 500 Index have reported first quarter earnings, and 84 percent said profits grew faster than expected, reported John Butters of FactSet. The blended earnings growth rate for the S&P 500 (which includes estimated earnings for companies that have not yet reported and actual earnings for companies that have) was 33.8 percent last week. For context, the 5-year average earnings growth rate (actual earnings) for the S&P 500 was 6.9 percent as of last week.
It’s important to remember the impact of earnings is often muted as earnings expectations – good or bad – tend to be priced into the market long before they are reported.
Inflation Expectations Weighed Unfavorably
Investors were concerned about inflation – and so were consumers. While the Federal Reserve and many economists believe we’ll see a fleeting uptick in inflation, others think the increase will persist. “…A consistent drumbeat of price hikes from major companies, consumer reports, and market data suggest the world may not be going along with their conclusion,” reported Dion Rabouin of Axios.
It is likely markets may pay particularly close attention to Federal Reserve statements about inflation and interest rates this week.
Rising Numbers of COVID-19 Cases Around the World Tipped the Scales
Concerns about India’s coronavirus surge, Japan’s state of emergency, and rising numbers of cases around the world caused investors to reassess expectations and some sold shares of companies that were expected to benefit from the re-opening of world economies. Yun Li and Maggie Fitzgerald of CNBC reported:
“The sell-off in shares that are tied to a successful reopening came as the World Health Organization warned that global coronavirus infections were edging toward their highest level in the pandemic. In the United States, while the country is maintaining a pace of 3 million reported vaccinations per day, about 67,100 daily new infections are still being recorded.”
Despite uncertainties, most (67 percent) professional investors who participated in Barron’s Big Money Poll said they were bullish on the outlook for stocks in the next 12 months. Just 7 percent were bearish.
Major U.S. stock indices finished the week flat or slightly lower. U.S. Treasuries rallied briefly before finishing the week flat.
(The one-year numbers in the scorecard below remain noteworthy. They reflect the strong recovery of U.S. stocks from last year’s coronavirus downturn to the present day.)
|Data as of 4/23/21||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor's 500 (Domestic Stocks)||-0.1%||11.3%||49.4%||16.1%||14.9%||12.1%|
|Dow Jones Global ex-U.S.||-0.3||6.5||47.5||4.9||7.6||2.8|
|10-year Treasury Note (Yield Only)||1.6||NA||0.6||3.0||1.9||3.4|
|Gold (per ounce)||0.4||-5.6||2.6||10.4||7.5||1.8|
|Bloomberg Commodity Index||2.2||13.3||45.4||-0.3||1.3||-6.6|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
A Capital Gains Tax Hike Has Been Proposed
Another factor that influenced last week’s stock market decline was the proposed capital gains tax hike. Investors’ response was a bit surprising since the tax increase wasn’t really news. Ben Levisohn of Barron’s reported:
“President Joe Biden made no secret of his plan to raise capital-gains taxes on the very wealthy. It was a campaign pledge, one that got enough attention for Goldman Sachs to release a note looking at the historical impact of previous increases on the stock market. (The answer: not very much.)”
According to Steve Goldstein of MarketWatch, the Goldman note reported the wealthiest U.S. households sold 1 percent of their equity assets prior to the 2013 capital gains tax increase. As a result, the S&P 500 Index experienced a short-lived loss six months prior to the tax hike and, six months after the tax hike, the Index was back in positive territory.
While the long-term impact on stock markets may be relatively small, the effect on high income investors could be significant.
The administration proposal, as written, would nearly double the capital gains tax rate for people with adjustable gross income of $1 million or more. (That’s about 0.3 percent of American taxpayers.) The current top long-term capital gains tax rate would increase from 20 percent to 39.6 percent, reported Laura Davison and Allyson Versprille of Bloomberg.
The capital gains tax increase is a proposed change. It has not been finalized, and there are indications the final tax may be lower if the bill is passed.
If you’re concerned about the potential tax increase and would like to learn more, please get in touch.
Weekly Focus – Think About It
“Share prices fluctuate more than share values.”
—Sir John Templeton, Investor, banker, and asset manager
Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
- The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
https://www.barrons.com/articles/the-feds-inflation-blind-spot-already-surging-grocery-and-housing-prices-51619209825 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/04-26-21_Barrons-The_Feds_Inflation_Blind_Spot-Already-Surging_Grocery_and_Housing_Prices-Footnote_1.pdf)
https://www.barrons.com/articles/india-and-japan-are-seeing-covid-surges-why-that-wont-derail-the-global-recovery-51619208829 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/04-26-21_Barrons-India_and_Japan_are_Seeing_COVID_Surges-Why_That_Wont_Derail_the_Global_Recovery-Footnote_5.pdf)
https://www.barrons.com/articles/stocks-have-more-room-to-rise-says-barrons-big-money-poll-51619222301?mod=hp_HERO (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/04-26-21_Barrons-This_Bull_Market_is_Far_from_Over_Pros_Say-Where_Theyre_Investing_Now-Footnote_6.pdf)
https://www.barrons.com/articles/why-did-the-dow-drop-this-week-it-got-spooked-by-old-news-51619221366?mod=hp_LEAD_2_B_1 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/04-26-21_Barrons-The_Stock_Market_got_Spooked_by_What_It_Already_Knew-Heres_Next_Weeks_Surprise-Footnote_7.pdf)
https://www.bloomberg.com/news/articles/2021-04-23/biden-aims-at-top-0-3-with-bid-to-tax-capital-gains-like-wages (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/04-26-21_Bloomberg-Biden_Aims_at_Top_0.3_Percent_with_Bid_to_Tax_Capital_Like_Wages-Footnote_9.pdf)
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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