The following economic awareness entry is based on short-term events and therefore should not be taken as information towards making investment decisions, which are of a long-term nature. It is only meant to provide clarity regarding current economic events, as there is often a large degree of incorrect information dispersed through the media or other sources.
PODCAST OF THE WEEK
Economic Awareness: Markets Overcome Delta Variant Reports
Overcoming a COVID-related economic growth scare, stocks moved higher amid a week of strong corporate earnings reports.
Delta Variant Head Fake
Stocks staged a broad retreat on Monday as traders worried about the adverse economic implications of growing Delta variant infections. Economically sensitive sectors, such as energy, financials, industrials, and materials, absorbed the brunt of Monday’s sell-off.
But the markets did a quick about face, posting four-consecutive days of gains and leaving the three major averages with fresh record highs.4
The sharp reversal may be attributable to a “buy on the dip” investor mentality, the absence of investment alternatives to stocks in this low interest rate environment, and massive financial liquidity. Stocks were also lifted by a healthy kick-off to the second quarter earnings season.
The earnings season moved into full swing last week, and the results exceeded the market’s high expectations.
Of the 120 companies in the S&P 500 index that have reported as of Friday, July 23, 89% of them beat the Street’s earnings-per-share estimates by, on average, 20.6%. Financials and Consumer Discretionary sectors provided the biggest earnings surprises (+28.9% and +24.5%, respectively), while Materials and Utilities delivered the smallest positive surprises (+5.3% and +2.5%, respectively).
These earnings beats are leading Wall Street analysts to raise earnings estimates for 3Q 2021 through 1Q 2022.5
The National Bureau of Economic Research said last week that the pandemic-induced recession ended in April 2020, officially lasting two months and making it the shortest recession in U.S. history.6
This Week: Key Economic Data
Monday: New Home Sales.
Tuesday: Consumer Confidence. Durable Goods Orders.
Wednesday: FOMC (Federal Open Market Committee) Announcement.
Thursday: GDP (Gross Domestic Product). Jobless Claims.
Source: Econoday, July 23, 2021
This Week: Companies Reporting Earnings
Monday: Tesla (TSLA), Lockheed Martin (LMT).
Tuesday: Apple, Inc. (AAPL), Microsoft Corporation (MSFT), General Electric (GE), Advanced Micro Devices, Inc. (AMD), Visa (V), Alphabet, Inc. (GOOGL), Starbucks Corporation (SBUX), 3M Company (MMM), United Parcel Service, Inc. (UPS), Mondelez International (MDLZ).
Wednesday: Facebook, Inc. (FB), The Boeing Corporation (BA), Qualcomm, Inc. (QCOM), Bristol Myers Squibb (BMY), Paypal Holdings (PYPL), Pfizer, Inc. (PFE), McDonalds Corporation (MCD), Shopify, Inc. (SHOP), Servicenow, Inc. (NOW), Thermo Fisher Scientific, Inc. (TMO).
Thursday: Amazon.com, Inc. (AMZN), Ford Motor Company (F), Mastercard (MA), Twilio, Inc. (TWLO), Merck & Company (MRK), The Southern Company (SO), Northrop Grumman (NOC), Comcast Corporation (CMCSA), AnheuserBusch InBev (BUD), Abbvie, Inc. (ABBV).
Friday: Exxon Mobil Corporation (XOM), Caterpillar, Inc.(CAT), Chevron Corporation (CVX), Procter & Gamble (PG), Charter Communications, Inc. (CHRT).
Source: Zacks, July 23, 2021
“If you have passion, a chip on the shoulder, a sense of humor, and you can explain what you do very well, it doesn't matter if you're a plumber or a singer or a politician. If you have those four things, you are interesting.”
– Larry King
Think About Credits and Deductions Now to Prepare for Filing
Here are a few facts about credits and deductions that can help you with year-round tax planning:
Taxpayers may be able to subtract tax credits from the total amount of tax they owe. To claim a credit, taxpayers should keep records that show their eligibility for it. Some major tax credits include the child tax credit and the child and dependent care credit, the American opportunity credit or lifetime learning credit, and the earned income tax credit.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
Macro Dieting is a New Way to Approach Calorie Counting
Macro dieting is a diet that goes a step further than just basic calorie counting. Instead of counting just the number of calories, you count the macronutrients, including proteins, carbs, and fats. How much of each macronutrient you need depends on your body type, goal, lifestyle, and activity level. Rather than depriving your body of nutrients, you are instead focusing on meals that give your body the nutrients it needs to be more efficient.
To start a macro diet, you first need to calculate how many grams of each macro you should be eating. A standard breakdown is 50-25-25, meaning 50% of your calories come from carbs, 25% come from protein, and 25% from fat. But, this breakdown will depend on your goals. For example, if you are focusing on strength training you may want to eat more protein.
Tip adapted from Cooking Light8
When can you add two to eleven and get one as the correct answer?
Last week’s riddle: If you were running a race, and you passed the person in 2nd place, what place would you be in now? Answer: 2nd place.
Spawning sockeye salmon in the Adams River, British Columbia, Canada.
Footnotes and Sources
2. The Wall Street Journal, July 23, 2021
3. The Wall Street Journal, July 23, 2021
4. CNBC, July 23, 2021
5. Earnings Scout, July 23, 2021
6. The Wall Street Journal, July 19, 2021
7. IRS.gov, February 21, 2021
8. Cookinglight.com, January 9, 2019
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
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July 26, 2021: Economic Awareness & Lifestyle Living
July 27, 2021