The Tax Man Cometh
April 15th is the traditional day for taxes to be filed in the U.S. However, there is more meaning this year as the Biden administration is pushing a new tax plan before Congressional leaders this week. According to one report by Goldman Sachs, this new tax plan could cut into corporate earnings (which are expected to rise by a record increase this year). It is unlikely that the new administration will get everything it wants, so time will tell how much corporate taxes will increase.
The economic data was positive overall last week. The Services sectors showed continued expansion, economic optimism hit new highs, consumer credit hit 5-year highs, but the Producer Price Index (PPI) increased more than double what the market expected. There were supply side issued that aided the rise, but clearly, there are inflationary pressures at play. The CPI number to be released on Tuesday will be closely watched.
The continued economic recovery in the U.S. has hinged on the success of the vaccination efforts. Over the weekend, the U.S. reached a new high of 4.6 million doses of the vaccine administered in one day. The U.S. has now administered nearly 120 million shots and has more fully vaccinated people (66.2 mil) than any other country in the world. This has been the primary driver behind the rise in U.S. Treasury Yields, the U.S. Dollar, and U.S. equities. The rest of the world is lagging behind for a variety of reasons - betting on one single vaccine instead of multiple, government waste and inefficiencies, et.al. The vaccination efforts has led to nearly 75% of U.S. elderly having been vaccinated, of which that age group accounted for 80% of all COVID deaths. As a result, the death rates hit a new low in the U.S. over the weekend. Herd immunity is within reach in the early Summer months, if it has not already been reached, and that will be great news for the economy.
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