Week in a Glance: Pandemic, Biden, Taxes and the US Economy 3Ds

12 abr 2021

The past week was marked by a number of records for the US stock market. Markets worked out some excellent NFP figures, as well as Biden's infrastructure plan, coupled with the Fed dovish stance (which, incidentally, was confirmed by the minutes of the last FOMC meeting, published on Wednesday).

At the same time, the markets completely ignored threats, both current (pandemic) and promising (the US tax increase). But the situation with the pandemic in the world is rapidly approaching new absolute highs in terms of new cases of diseases and deaths. And if the US and UK somehow control the situation thanks to the success of the vaccination campaign, then the third world countries are rapidly sliding into the abyss.

The Biden administration unveiled its plan to revise its Corporate Tax Code on Wednesday. Its key element is an increase in the corporate tax rate from 21% to 28%, as well as amendments to the Code that will make it more difficult for companies to avoid paying taxes.

An analysis of 13 episodes of the US fiscal policy tightening over the past 100 years showed that the stock market perceives it very painfully and with losses. But once again we note that last week the markets did not think about it at all.

Nor did they think about the record US trade deficit, the record US budget deficit, or new records of US government debt. But not thinking about something does not mean that it does not exist. So sooner or later the markets will focus on the "3Ds" of the US economy, and then buyers in the stock market will remember a lot.

The coming week will be more eventful in news terms than the previous one. Reporting season kicks off this week (according to Refinitiv, S&P 500 earnings in the first quarter are expected to rise 24.2%), so the markets are preparing for the positive in advance. In addition, on Tuesday, the IPO of the largest US cryptocurrency exchange Coinbase is to take place, data on retail sales in the US, the Eurozone and China, as well as the growth rate of GDP and industrial production in Britain will be published. Also, the attention of the markets will be focused on the numbers on the USA consumer inflation and China's GDP. In general, it will not be boring - that's for sure.