This week’s positive economic and employment data continued to provide hope that the recovery is accelerating, as markets balanced these promising statistics against spiking coronavirus case numbers in several countries. Reports that the Biden administration will seek to increase capital gains tax rates added to stock market volatility, leading U.S. stocks to finish trading lower for the week.
The S&P 500 Index finished down 0.1% for the week, while the Dow Jones Industrial Average fell 0.5%. Year to date, the S&P is up 11.3%; the Dow has gained 11.2%. Weekly first-time unemployment claims again outpaced expectations, falling to 547,000, while continuing claims marginally decreased to 3.67 million. The housing market recovered from February’s weather-affected dip. New home sales figures for March were the highest since 2006.
Reports that the Biden administration may seek to nearly double the top capital gains tax rate caused markets to retreat on Thursday before recovering Friday. It is essential to realize that proposals are not finalized legislation, and that much can change during the legislative process. While Democrats control both houses of Congress, the narrow scope of their majorities could necessitate some concessions in order for this new tax bill to gain passage.
Geopolitical conflicts and coronavirus hot spots outside of the U.S. combined to cast a shadow on the positive economic news. Relations between the U.S. and Russia have been further strained by the recent buildup of Russian forces near their border with Ukraine. It is unclear whether Russian President Vladimir Putin intends to offensively move against Ukraine, or if the troop staging is an early-administration test of President Biden. Coronavirus concerns in India, Japan, and several European countries provided evidence this week to the uneven nature of worldwide recovery from the pandemic. The volume of cases and hospitalizations in India have increased over the past month. According to the World Health Organization, 28% of all new worldwide cases in the past week have come from India. Japan announced a state of emergency in a handful of areas that will last into May, curtailing travel and office work. To learn more about our thoughts around investing during challenging times, please review our Q1 market commentary.
Tax planning is a widely discussed topic during this time of year and we encourage you to reach out to your Wealth Advisor to discuss tax strategies for 2021. tax strategies for 2021. Please check out our 2021 tax guide to review useful information on tax rates, deductions, credits and deadlines. We also encourage you to review our recent article on understanding cybersecurity threats during tax season. As always, please contact us with any questions. We are here for you every step of the way.