Market Pause, However Resilient!

Last week’s news paused the market from moving higher!

  • Retail sales for July disappointed, led by lower automobile sales from inventory shortages and shockingly high sticker prices. The report also suggested a shift from retail spending, into travel and leisure.
  • Last week’s housing report also came in weak, as there is no new news here. Low inventory and low rates will keep existing home prices elevated.  Even with lumber prices crashing back down to pre-pandemic levels, cost pressures of new homes are currently being driven by increasing labor costs, as well as other supplies, as shortages exist in many manufacturing sectors.
  • The current status of our Covid situation is slowing growth and contributing to inflation. Many consumers have turned temporarily cautious with their spending and travel plans for the fall.  The variant is also slowing supply chains… meaning chips and other products in demand are bottlenecked, which increases inflationary pressures.
  • The most recent Fed “minutes” are suggesting the Fed is now considering when to begin pulling back on the $120 million of monthly US Government and Mortgage Bond purchases. Much debate is suggesting they will begin between late this year and early next year.  My guess is the Covid Variant has something to do with their decision makingAt this point, why not wait to see what happens in September, as schools resume and more people transition back to their offices.  Many large companies who previously had planned to have employees back next month, have moved the timeline until January 2022.  If the current level of new cases does in fact shrink through September, I will expect the Fed to create an actual timeline.
  • Afghanistan; we certainly hope this situation ends soon with all Americans and others brought to safe grounds ASAP. The concern from an “economic and market” standpoint is President Biden may have lost some clout, which is necessary when trying to pass approximately $4.6 trillion in new spending.  The market does believe, in my opinion, the 2 spending plans will in fact become law. The slim majority in the House suggests a battle, not only between the D’s and R’s, however amongst the D’s.

For the week the Dow Jones retreated (1.01%), the S&P 500 (.55%), the Nasdaq composite (.70%) and the Russell 2000 Small Cap down (2.47%).

International stocks faired worse, with foreign stocks down (2.94%) and Emerging Market stocks down (4.61%).

Donor Advised Funds

Those who are charitably inclined have had to wrestle with making contributions and receiving practically no income tax benefit.

If you are 70 ½ or older, you can use part of your IRA each year to make contributions and receive a nice tax benefit.  Yes, the starting age for RMDs is now 72, however the law did not change for Qualified Charitable Contributions.

The tax code change in 2017 increased the standing deduction whereas over 90% of taxpayers do not itemize, limiting the beneficial tax impact of a charitable contribution.

With a Donor Advised Fund, you can make a lump sum contribution of cash or stock, possibly obtain a significant current year income tax deduction, direct how the funds are to be invested, and choose when and how much to distribute to your qualified charities.

If this is something you would like to explore, please be sure to schedule a time to chat.





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