It's been a rough week for the market and we're finishing off lower than we started after Biden announced yesterday that he plans to raise the Capital Gains Tax from 20% to 39.6% for people making over $1M per year. That sent the Dow down over 300 points yesterday – the indexes generally lost 1% across the board but 4,132 is holding for now on the S&P, which is the 45% line with 4,275 the 50% line on the 5% Rule.

Stimulus, Low Interest Rates and Tax Cuts are the reason we're so far over the true value range with the S&P 500 trading above 35 times the expected earnings of its component corporations. If we begin to dismantle those things – the market will fall in kind. Earnings have been OK so far, with most companies beating very low expectations. Remember we shut down during Q1 last year so the comps are against an impacted quarter and, of course, the stimulus has papered over a lot of the losses from the slow economy – we're not really learning much from the Quarter.

PMI April 23 2021

BUT, in happy, happy news, Global Purchasing Managers' Indexes are popping as hiring is picking up BUT, that's hiring in EXPECATION of an uptick in demand that has not, in actuality, happened yet. In fact, just yesterday, India alone reported 314,000 new cases of Coronavirus, with Modi now putting up Trump-sized numbers in a complete and utter failure to contain the disease. Of course, to be fair, India has 4 times more people than the US, so there's still a long way to go to match Trump's level of incompetence (or did he do it on purpose?) on a per-capita basis, right?

Many European countries retain restrictions on services that require close physical proximity and most forms of international travel. But the surveys recorded the first expansion of activity in its dominant services sector since August 2020, while its manufacturing sector continued to enjoy strong growth. “Although the service sector continued to be hard hit by lockdown measures, it has returned to growth as companies adjust to life with the virus and prepare for better times ahead,” said Chris Williamson, chief business economist at IHS Markit.

There are continuing signs that the pace of the global manufacturing recovery was already straining supply lines, which may prove to be a drag on growth. In the eurozone, businesses reported the largest rise in waiting times for delivery of supplies in the survey’s 23-year history, while the prices they paid for their inputs rose at the fastest pace in a decade. Similar surveys from the U.S., released at 9:45, are expected to point to continued strong growth, stretched supply lines and costlier inputs and we'll see how that goes in our Live Member Chat Room.

Have a great weekend,

- Phil