Monthly Market Update:
Recap of April 2021
Taxes, covid variants, and cryptocurrency. All of these have been headlines in the past month, though none have been able to take down the stock market.
If this is your first time tuning in, I am Eric Powell. Let’s dive in and take a look at what has happened this past month relating to the stock market and what we are doing for client portfolios.
To start it off, let’s talk taxes. The President has presented his plan and the market did not blink. Though there has to be legislation passed, the presented information discusses taking high earners that reach the top tier of the tax bracket and making them pay 39.6% on the top tier versus the current rate of 37%. A 2.6% increase does not make or break anyone, though the change in long term capital gains for anyone making over one million could. The current long-term capital gains rate is 15% for the majority of Americans and tops out at 20% for the wealthy. The current proposal sets any income over one million taxed as ordinary income, which would put the wealthy paying 19.6% more on long term capital gains.
Other pieces of the tax proposal may affect more of the higher income middle class due to a 26% 401k tax credit instead of a tax deduction. I’ll spare you from going into significant detail on this until we see what will be changing and when.
For Covid, the virus continues to be a concern, though more states are easing restrictions. As states ease, the economy is projected to continue growing.
Another topic that you have probably heard of recently is cryptocurrency. Whether you were a part of the crypto crash in 2018 or just learning what it is, many are rolling the dice on whether their digital coins will continue to have the elaborate returns that have been seen this year. For those who do not understand crypto, well, you are right there with about everyone. The basics behind the digital currency is that the currency links to technology that helps with secure money transactions. The issue is the coins are not regulated and there are coins made that do not have any real value, such as Dogecoin. This coin was made as a joke, though it now has almost a 7000% return year to date.
Too answer the question you may be wondering; we do not invest in cryptocurrency in our portfolios. Currently, there are not any specific funds that regulators have allowed to enter the market and to be honest, the manipulation behind cryptocurrency provides too much risk. For those playing, be sure to not risk more than you can afford to lose and be sure you are on track with your financial plan first!
For the stock market, it has continued to rise despite all odds. For our portfolios, we continue to remain diversified, with the goal of growth and a decrease in volatility.
For the April numbers, the S&P 500 index was +5.24%, Dow Jones Index was +2.71%, Nasdaq Composite +5.4%, MSCI EAFE +2.87%, MSCI Emerging Markets +1.19%, Barclays US Aggregate Bond +.79%, Barclays US Corporate High Yield +1.08% and Barclays Municipal +.84%