Markets Through Year-End? / Corporate Profit Reports / Charitable Deductions

The S&P 500 Index is now up over 17% year-to-date.  It’s one of the highest performing major stock market indexes in the US, and around the globe.

For the S&P to double its return by year-end, the Index would need to end the year at approximately 5111.  For a 10% return from here, the index would need to rise to 4805.

Much needs to go “right” for either to happen.  Inflation will truly need to prove transitory, and the Fed will have to communicate it’s taper intentions carefully. The major unknown factor is the 6-month future of how Covid will impact when the colder weather reappears.  My mind is certainly working overtime on the last point.  The “what-ifs” are significant. 

Last week was mostly higher, with the Dow rising .25%, the S&P 500 .42% and the Nasdaq Composite .43%.  The Russell 2000, foreign stocks and emerging market stocks were down respectively, (1.11%), (.07%) and (2.58%).

Bond yields are confusing most people with the 10-Year yield down to 1.36%, the lowest level since February 2000.  Hmmm! Perhaps the bond market is looking forward to when the stimulus fades and the current rate of economic growth also slows?

Corporate Profits (Costs?)

This week marks the start of quarterly corporate profit reports.  Certainly, we’re expecting profits to be significant overall in Corporate America.

Profit margins have risen significantly, companies have been able to refinance debt at rock bottom costs.  Over the last few months however, our monthly government reports have suggested, many of corporate America’s input costs are rising significantly.  Should not be a surprise.

The important part of this quarter’s reports will be, what is said about rising input costs? Costs, including oil, food, various input commodities, supply constraints, increasing wage costs may start to dent profit margins going forward, unless they moderate.

Now, think about profit reports a year from now, when companies compare the 2nd Quarter 2022, to the 2nd Quarter this year.  To increase profits significantly from here will be a challenge.  The markets will sure be paying attention!

Charitable Deduction

Just as quick reminder, in 2021 most taxpayers can deduct a charitable contribution in the amount of $300 and $600 for joint filers.  This can be done even if you take the standard deduction and don’t itemize.  If you’re charitably inclined, this is a no-brainer.

Otherwise, it’s challenging to obtain a tax benefit with your charitable contributions.  I’ll be discussing additional ways in future blog posts this year, however why not write the $300/$600 check today?! As always with taxes, it’s important to consult with your trusted advisor, prior to making any decisions.







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