MARKET RECAP

• The SPX hit a record on Monday but closed 0.4% lower for the week. US stocks -0.18%, international stocks +0.92%, bonds -0.54%.
• Higher inflation put a pause on recent market advances. CPI was up 0.3% for the month and 3.1% for the year. Core inflation was up 3.9%. The SPX fell 1.4% on the news but gained back ground as the week went on.
• PPI was up 0.7% year over year versus expectations of +0.3%.
• Bitcoin cracked the $50,000 level (see the chart below).
• Retail sales were down a seasonally adjusted 0.8% in January; economists expected an increase.
• Unemployment claims fell to 212k.
• Trump v Biden (the highlights below are from the article in this week’s Barron’s – “Trump vs Biden: Who Can Handle the Reins of a Hot Economy)
  • Debt
    • Under Biden, debt will most likely exceed 100% of GDP.
    • Trump added $8.4 trillion to the debt.
    • Biden will add about $4 trillion.
    • Neither party has shown any serious interest in reducing the debt or at least slowing its growth.
    • For now, the debt is manageable.
  • Taxes
    • Many parts of the 2017 tax cuts expire starting in 2025.
    • Marginal rates for individuals will increase.
    • Estate tax exemption will be cut in half.
    • Deduction limits for state and local taxes will change.
    • Trump will try to make those extensions permanent, which would cost $3.5 trillion, according to government agencies.
    • Trump is also thinking about corporate rate cuts.
    • To do either will probably require cuts in spending.
    • Biden will extend tax reductions for households with less than $400k in income.
    • Biden would pay for that by increasing taxes on the wealthy and those with the highest income.
    • He would increase corporate taxes, including a tax on buybacks.
    • He might cut some spending.
  • Tariffs
    • Trump’s tariff strategy from his time as President has been judged “at best a wash” or “mildly negative”, according to MIT economist David Autor.
    • Biden’s main thrust has been to prevent China from getting US technology.
    • Trump says he would increase Chinese tariffs to 60%. That would be a $300 billion tax increase to American consumers, according to Erika York of the Tax Foundation.
    • The threat might be stagflation, lower growth, higher prices.
  • Federal Reserve
    • Powell’s term ends in May 2026.
    • Biden hasn’t spoken on Powell’s reappointment, but Trump has indicated no.
    • Trump does not respect the Fed’s independence.
    • Biden does.

CHART OF THE WEEK

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