Last week the markets were a little spooked by an increase in global COVID cases and concerns of a market slowdown due to proposed Tax Hikes by the Biden administration. We believe these concerns were mostly unfounded and the markets rebounded by the end of the week.
India saw a spike in cases last week, averaging more than 300,000 per day. On Wednesday, India accounted for 35% of the new cases worldwide. However, as we noted in our Musings last week, this is less of a concern as India has one of the lowest COVID mortality rates (1.2%) in the world (as compared to the low rate in the U.S. of 1.8%). While India and the U.S. lead the world in the number of people fully vaccinated, India only has vaccinated 1.6% of their population (vs. 26.5% for the U.S.). Meanwhile, the joint committee of the CDC/FDA met on Friday and approved the resuming of the J&J vaccine for administration. This will help pick up the vaccination effort that dropped below 3 mil doses administered per day. Still, 140 million people have received at least one dose of the vaccines. At the current pace, 70% of the U.S. population will be at least partially vaccinated by July 9th.
The Economic data was light last week, but all numbers except Existing Homes Sales surprised to the upside. Weekly Jobless Claims remained below 600k for the 2nd consecutive week. Earnings so far have come in very strong. With 25% of S&P 500 companies having reported, 84% are beating on earnings expectations and 77% are beating on revenue expectations. This week, the FAANG members (minus Netflix) will report. The economic releases pick up with the first peak at Q1 GDP. The market is expecting 1st quarter GDP to come in at +6.5%, while the Atlanta Fed has projected GDP to equal +8.1%
The Biden administration is floating a Capital Gains hike for earners of $1 million or more from 20% to 39.6%. This seemed to shock the market. We are not really sure why, since this is exactly what President Biden promoted during his 2020 campaign. We do not believe that the top rate floated by the administration will get through Congress in its current form. More than likely some compromise of 28% will be reached.
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