We usually say watch the corporate profits and ignore all the other news. However, with the 1.2 trillion the government just pumped into the economy, I worry that we are on a morphine high caused by so much money being pumped into the economy. As good as these numbers are, we are keeping an eye on several things. First are the geopolitical tensions around the world and the Middle East. The potential for disruptions in the supply chains and oil, let alone the humanitarian consequences are worrisome like a distant thunderstorm. Next is what the Feds are going to do with interest rates and how they will react to inflation which is higher than they want. As I have previously predicted, the expected rate cuts are not coming for a while. Corporate earnings are coming in strong, unemployment is down, industrial production is up, and consumer confidence is up. All this causes a pause in the Feds reducing rates. You do not add fuel to a “hot” economy if you are trying to reduce inflation. While everything today looks positive except inflation, I worry that we are experiencing a sugar high from all the federal spending. We have never had or used QE (Quantitative Easing) and now QT (Quantitative Tightening) and if this great experiment is going to lead to a desired soft landing. On a much smaller scale this was tried in the late 70’s and it resulted in “stagflation". I think of it as state capitalism but like Venezuela and every other country that has tried too much government the morphine wears off. It could lead to a recession or the desired soft landing. All the above affects investor sentiment and often the markets ignore the economics and sway the market in illogical and unexpected ways. Stay tuned. 

On another note, a little head up. The WSJ just printed an article about the IRS auditing of taxpayers. The Treasury Inspector General for Tax Administration (TIGTA) released its latest report on how things at the IRS are going. Remember the new agents going after income above the $400,000 and above. Per the report “as of last summer 63% of all audits were on people making less than $200,000 and 80% of all audits were on people earning less than 1 million”. People in the top 3 tax brackets paid 77.1% of all income taxes. We taxpayers are the ones who will be paying the above-mentioned government spending. As for taxing the billionaires, if we taxed them 100% it would fund the government for 8 months. $5 trillion is what the billionaires have our debt is $33.1 trillion. Prepare your taxes accurately in case you are one of the lucky people to be audited. 

We thank you for the trust you have in us, Nick, Keith, Alison, and I will continue to do our best to give you excellent financial and investment advice. 

Yours Truly,

Willis Ashby, President and CFP® 

P.S. If you would like to receive future reports via email, please contact the office at 303-220-5525
 

Sources - Gao.gov; WSJ; First Trust; Morningstar Research; Zacks Research; Tax Foundation.org; Schwab Economics