Taxes and Inflation

Stocks cap off a strong month with ‘fresh new highs.’ October was the strongest month for the indices since November last year. Even the earnings ‘flop’ from Apple and Amazon didn’t ‘ding’ the stock market–and it really didn’t hurt Apple or Amazon either. “It seemed investors poor earnings results and supply-chain constraints from Apple and Amazon as a short-term problem, and nothing that ‘derailed’ their dominance,” writes Edward Moya, senior market analyst for the Americas at Oanda. History suggests there’s a good chance the market is heading higher, at least based on one measure of breadth. The NYSE Cumulative Advance/Decline line, which tracks rising versus falling stocks in aggregate, finally hit a record high this past week, something it hadn’t done since June. When the A/D line has hit a new high after more than 90 days, the S&P 500 has been higher three months later 22 out of 25 times since 1935, according to Sundial Capital Research’s Jason Goepfert, while gaining a medium 4.1%. “Over a very long history, probabilities favor rising stocks, or at least only limited declines, after the breakouts in breadth,” he explains.

Summing up the week, the benchmark index (S&P500) added 8.96 points, or 0.2%, Friday to end at 4605. For the month it added 6.9%, the index’s largest percentage gain since last November. The technology heavy Nasdaq Composite also notched its best performance since November, adding 7.3% for October. For the day, the index added 50.27 points, or 0.3% to finish at 15498. The Dow Jones Industrial Average, meanwhile, gained 89.08 points, or 0.2%, Friday to end at 35819. For October, the index gained 5.8%, its best monthly showing since March.

Travel Plans Pick Up, And Europe Is Hot….More travelers are starting to think ‘big’ about vacations again. The booking rates are starting to trend closer to pre-pandemic levels, analysts say. Travel advisors say more travelers in recent weeks have been committing to trips over spring break and for next summer. Travelers are encouraged by the availability of Covid-19 booster shots and positive news on vaccines for children, says Nora Blum, vice president at Travel Leaders Market Square Travel in Maple Grove, Minnesota. For 2022, many are already setting their sights on Europe, where many countries are embracing long-term, low-intensity ways to manage Covid-19 as it becomes endemic in parts of the continent. Thus enabling more open travel. A quarter of Best Western’s North American hotels and one third of its hotels in Europe are outpacing 2019 bookings for the following summer, according to President and CEO David Kong. The longer term planning points to travelers’ rising confidence as hotel-booking lead times begin to approach 2019 levels, says Katie Moro, vice president of data partnerships for hospitality at Amadeus, a travel technology company. “I think Europe is the place that people still feel very confident about, just because it’s easy, it’s straightforward, it’s interesting but maybe not too exotic”, says Samantha Collum, director of operations and senior travel advisor at River Oaks Travel Concierge in Houston, adding some of the most popular destinations for next year include Italy,Croatia, Greece and France. Travel has come alive again, a positive indicator that some normalcy is returning.

The Holiday Feast Is Going Be More Costly….Meats have led the rise this year in the U.S. food costs, while prices for fresh fruits and cereals including those made from oats are also higher, as drought conditions persist in the ‘breadbasket’ states. Restaurant menu prices, known as “food away from home” prices, have outstripped the rise in “food at home,” or retail store prices, this year. The consumer price index in September for the food-away-from home category was 4.7% higher than the same month a year ago, while the food-at-home CPI was up 4.5%, according to the U.S. Department of Agriculture. “Demand for meat remains strong at the domestic and international levels, despite record pricing,” says Issac Olvera, lead food and agricultural economist at ArrowStream. He adds that there was a “lack of flexibility” across restaurant menus during the pandemic timeframe. Heather Sager Allan, a marketing representative for Carmela Fine Foods, of Fraser, Michigan, notes “we have experienced over a 50% inflationary rise in meats this year, with no let up on the horizon.” The USDA predicts prices for beef, veal, and pork to rise significantly this year and into 2022. Dining gets pricey….


Randall W. Forsyth, ‘Up & Down Wall Street,’ Barron’s “While high earners with annual incomes over $1 million would get hit with surcharges on their ordinary income, as well as capital gains and dividends, those earning a mere six figures would keep their lower tax rates from the 2017 Tax Cuts and Jobs Act. Estate-tax exemptions would, however, revert to their previous levels of about $6 million per person, from the current $11 million-plus, but the step-up in costs basis at death would survive.”

Mark Zuckerberg, Facebook CEO Barron’s “From now on we’re going to be metaverse first, not Facebook first.”

Frank Gretz, of Wellington Shields, Barron’s “The market has ignored/survived a lot of bad news,” he writes. “To whatever degree, higher seems likely.” (referring to the ‘bull’ market).

Joan Crain, a senior director and global wealth strategist at BNY Mellon Wealth Management, Barron’s “I’m astounded by how things have changed. In less than a couple of weeks, things that were a shoo-in-raising corporate taxes and individual tax rates–were off the table,” says Ms. Crain, speaking of the major reduction of Joe Biden’s massive package and all the changes.