I will begin by apologizing for the length of the read this week, I wanted to make sure I covered the market, as well as the major impacting news of the latest round of stimulus passed this week in Washington. This week the market relaxed a little when the concerns over inflation were tempered by latest inflation figures.
I hope you are well and looking forward to spring, although we had a bit of winter weather this week with a dusting of snow in March.
Now on to this week’s update--
The Dow Jones Industrial Average set intraday record highs every day this week, ultimately rising 4.1% and closing at a record high. The Russell 2000 (+7.3%) and S&P 500 (+2.6%) set new highs for the first time in a month while the Nasdaq Composite (+3.1%) dug itself out of correction territory with a 3% gain.
Every sector in the S&P 500 contributed to the weekly advance, with some investors fearful of getting left behind in the rally effort. The consumer discretionary (+5.7%), real estate (+5.7%), materials (+4.4%), utilities (+4.4%), industrials (+3.6%), and financials (+3.2%) sectors outperformed the benchmark index. The communication services sector (+0.7%) trailed with a modest gain.
The advance was supported by a confluence of factors, including the following:
The news flow supported the reopening optimism and inflation expectations, sending the 10-yr Treasury note yield up another nine basis points to 1.64% by week's end -- its highest level since last February. Growth stocks trimmed their weekly gains with this upwards move.
Interestingly, at the beginning of the week, widely-followed money manager David Tepper told CNBC that the 10-yr yield is likely at, or near, the top of a new range due to the higher yields attracting foreign buyers. This was when the 10-yr yield was trading at 1.61%, so investors will continue to watch the 10-yr yield over the next few weeks for any uncomfortable swings.
The CBOE Volatility Index dropped 16.1% to 20.69, as investors reduced their hedging exposure amid the bullish price action in the market.
Upcoming Economic Calendar
One year into the pandemic, individuals everywhere are experiencing emotional, physical and economic implications. In an effort to ease the pandemic’s detrimental effects, the federal government has recently passed a third stimulus package called the American Rescue Plan Act.
Eligible individuals and families will receive stimulus checks up to $1,400 per person. As a reminder, here’s what you need to know about your third stimulus check.
The American Rescue Plan Act Has Passed: Here's an Overview of the $1.9 Trillion Stimulus Plan
Below is a breakdown of some important components to this legislation, including what business owners, families and struggling individuals may need to know.
Unemployment Benefits
Eligible unemployed individuals may continue receiving an additional $300 in federal unemployment benefits through early September 2021.1
Small Businesses & The PPP
Overall, the bill allocates around $50 billion toward assisting small businesses affected by COVID-19.1
The Paycheck Protection Program will receive $7.25 billion, but the new legislation does not change the PPP’s end date of March 31, 2021.1 Bars, restaurants and entertainment venues heavily impacted by the pandemic will also be eligible to receive grants from the government.
Low-income communities have been some of the hardest hit financially during the pandemic. In response, the government will be allocating $15 billion toward Economic Injury Disaster Loan (EIDL) Advanced Grants. Eligible businesses in low-income communities may be able to receive up to $10,000 each.1
Employee Retention Credit
The Employee Retention Credit (ERC) will be extended through the end of 2021. With this refundable tax credit, business owners may claim up to $7,000 per employee per quarter.1
Child Tax Credit
Previously, the child tax credit offered eligible families a $2,000 tax credit per child under the age of 17. With changes made under the new legislation, the child tax credit is temporarily expanding for 2021. Eligible families may receive up to $3,600 for children 5 and under and up to $3,000 for children ages six to 17.1
Here is how the American Rescue Plan is changing conditions and stipulations regarding the child tax credit:1
COVID-19 Vaccination Distribution & Testing
Similar to previous legislation, a portion of the American Rescue Plan will designate funding for COVID relief. Around $15.05 billion will go toward vaccine production and distribution, while $50.8 billion will go towards testing, contact tracing, genome sequencing and global health response initiatives.1
The Federal Emergency Management Agency will receive a portion of the funds as well.
State & Local Government Assistance
States, tribal governments and cities will receive $350 billion in federal assistance.
In addition, this legislation includes a $10 billion infrastructure program to help local government continue capital projects.1
FEMA Emergency Food and Shelter Program
FEMA’s Emergency Food and Shelter Program will receive $510 million to support initiatives for homeless and struggling families including:1
Wondering how this recent legislation and other COVID-relief initiatives may benefit you? Your trusted financial professional can offer additional assistance and insight as we all continue to combat the economic instability caused by COVID-19.
The Rundown on Stimulus Checks: Your Questions Answered
Just as before, taxpayers who qualify will receive a direct deposit of up to $1,400, and couples will receive $2,800. In addition, families will receive $1,400 per child under the age of 17. The payment will begin to phase out for individuals with a 2019 or 2020 adjusted gross income of $75,000, couples with a $150,000 income and head of households with a $112,500 income.1
Important to note is that the initial amount paid will be based on either a taxpayer’s 2019 or 2020 income tax return (whichever is the latest return that the IRS has on file), but it will ultimately be ‘trued up’ if a taxpayer is owed money based on their actual 2020 income. In other words, taxpayers will be given an estimated amount based on the last income the government has on file, but could end up getting even more (albeit later) if their 2020 return shows they made less money than they made in the previous year.
How Does the Phase-Out Work?
Individuals who make under $75,000 and couples who make under $150,000 are eligible for the full stimulus check.
For taxpayers with higher income, the amount is reduced for individual filers earning between $75,000 and $80,000, or $150,000 and $160,000 for couples. This means that individuals with an income higher than $80,000 are not eligible to receive a stimulus check and neither are joint filers with an income over $160,000.1
For head of household filers, those earning between $112,500 and $120,000 will receive a reduced amount. Those earning $120,000 will not receive a stimulus check.1
Are Noncitizens Eligible?
The CARES Act did not allow families of mixed-status to receive a stimulus check. This refers to households in which a U.S. citizen is married to a noncitizen. In the new package, both the U.S. citizen and their noncitizen spouse are eligible to receive a stimulus check.2
How Will I Receive My Payment?
The IRS will use information from 2019 or 2020 tax returns to calculate your payment amount and will send the payment to the bank account listed on the return.2
What if the IRS Does Not Have My Direct Deposit Information?
The IRS has created an online portal, called Get My Payment, where individuals can check the status of their stimulus check and learn what information the government may still need in order to issue a check. According to the IRS, this portal will provide important information including your payment status, payment type and whether additional information (including bank account information) is required.
If I Usually Do Not File a Tax Return, How Can I Receive a Check?
Those who usually do not file a tax return, including low-income taxpayers, senior citizens and Social Security recipients, will need to file a simple tax return (but still will not owe tax) in order to receive their check. The IRS has created a special page dedicated to the Coronavirus and will be updating it with next steps on how to do this soon.
What Is the Difference Between a Stimulus Check and a Tax Credit?
The stimulus check is the same as a tax credit, and it is specifically an advanced refundable tax credit, meaning it is a refund allotted to you and is also sent in advance of the 2020 tax return.3 A refundable tax credit differs from a nonrefundable credit, which only applies to the amount of taxes you owe and is not available as a refund to you otherwise.3
Is the Stimulus Check Taxable?
Since the stimulus check is a tax credit, it is not income and therefore is not taxable.
If you received a previous stimulus check, it’s likely you can expect to receive another stimulus check in the coming weeks. As with anything related to the current pandemic, do not hesitate to reach out if you have a question regarding your stimulus check or what to do with it.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
Source: Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com.