Hard to believe but we actually had a setback last week in the equities markets.
The Standard & Poor’s 500 stock-index fell back below 4500.
Many analysts pointed to the downgrade by Fitch for the U.S. Treasuries.
They cited the increasing debt having to be funded at higher interest rates.
Not sure why they picked last week, but it is worth considering that you do have to pay back what you owe.
Our federal government isn’t bound by a balanced budget like the states.
It does seem rather daunting when you realize how large our indebtedness has become.
The real problem is that our Congressmen and Senators are not elected to cut spending.
They are all there to bring the pork home.
It usually takes an almost financial disaster to force their hand in Washington.
It seems inevitable that taxes will have to increase.
The problem with that plan is that the middle class shoulders all the burden.
The rich lobby their way out through paid-for loopholes. You take higher taxes and higher interest rates, it is not a prescription for greater wealth for the general public.
This all comes right in the midst of an election cycle.
The good news for the current administration is the fact that the economy is performing much better than predicted.
You can call it what you want, Bidenomics, but it was hardly forecasted as such.
Much can and will happen over the next year.
It is interesting though to watch how people who have had little or no use for using their savings for investing seem to always show up near the top.
I had a client call me about an ETF that copies the S&P 500 stock-index as well as selling covered calls.
This is a great strategy while the index is climbing.
The covered calls allowed the ETF to pay out over 10%.
That only works while the index climbs.
My client noticed simply because of the yield.
That is always the problem with chasing yield.
Can it be maintained?
Dividends aren’t always maintained as evidenced by GE.
You do have to be impressed though by the earnings season.
It was not particularly better than expected, but it didn’t come in lower.
This is all being done with fears of a recession, higher interest rate, higher wages and inflation.
The Fantastic Seven performed as projected.
I am not sure you could ask for much more.
Should we get a pull back, I would see that as only to be expected.
The trend is still upward.
It is that unseen Black Swan that could really ruin the party.
The move by Fitch last week could have been a warning shot across the bow.
