Domestic equity markets continued to hit new highs as the majority of U.S. corporations reporting earnings have beaten estimates. Corporate profits are expected to jump 35% for the third quarter. With all this good news, it’s no wonder the volatility index has fallen to a low not seen since last February.
Fed Chairman Jerome Powell said last week that “Supply-side constraints have gotten worse.” Further adding, “The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.” While the Fed still intends to taper its bond-buying program this year, he said it would be important for the central bank to stay flexible.
The chart below from the World Bank and reprinted in the Wall Street Journal, shows the decline in shipping goods that cross at least two borders. This shows the challenges global economies face as they deal with shipping bottlenecks. For instance, demand for computer chips skyrocketed as people working remotely purchased more computers and assorted electronics. The auto industry suffered the most from this as several car factories were shuttered due to a lack of computer chips. Chip stockpiles were already low due to U.S. tariffs and export bans. Extreme weather further hampered domestic production as several chip facilities in Texas closed.
The stock market has always been called a “leading indicator” of what the economy will be like in six-nine months time. The biggest positive we can take from recent gains is, the world will eventually get things under control again for the flow of goods across borders.

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The Markets and Economy

• According to the Internal Revenue Service, over the nine year period of 2010-2018, the wealthiest one one-thousandth of one percent (0.001%) of U.S. taxpayers paid $402 billion in aggregate federal income taxes over that period. This resulted in an average tax rate of 22.1%.
• Amazon.com Inc. announced plans to hire 150,000 seasonal workers in the U.S. The figure is 50% more than the 100,000 Amazon hired last year for the holiday selling season.
• An estimated $3.3 trillion of additional cash has been accumulated in bank accounts by American households since the start of the pandemic that otherwise would have been spent.
• Last week I reported that 60 ships were waiting to be unloaded at the port of Los Angeles. That figure has now risen to 100; an all-time high.
• After a late-summer dip, U.S. home sales rose sharply in September. Home sales were up 7% from August’s numbers.
• According to the Department of Education, as of March of this year, 456,000 Americans with student loans have had their college debt forgiven for a total of $8.7 billion.
• Industrial production in the U.S. declined in September. The -1.3% drop in output at factories, mines and utility companies was a result of disruptions in the auto industry as well as lingering effects of Hurricane Ida.

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
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