Morning Commentary
It was another lackluster session, but stocks bounced into the close to limit the decline on Thursday. The winners were defensive in nature; Consumer Staples, Real Estate, and Utilities.
The big story of 2019 remains the outperformance of value versus growth, as investors continue to seek opportunities outside the momentum darlings of the last two years. We can measure how well value has performed using equally-weighed indexes, where each component has the same influence. Equal weight changes the influence of S&P sectors, comparing value (SPW) and growth (SPX).
Value vs Growth |
SPW |
SPX |
Communication Services (XLC) |
4.3% |
10.3% |
Consumer Discretionary (XLY) |
13.0% |
10.1% |
Consumer Staples (XLP) |
6.2% |
7.2% |
Energy (XLE) |
6.1% |
5.5% |
Financials (XLF) |
14.0% |
13.5% |
Health Care (XLV) |
12.2% |
15.1% |
Industrials (XLI) |
14.1% |
9.5% |
Materials (XLB) |
5.0% |
2.7% |
Real Estate (XLRE) |
6.3% |
3.0% |
Technology (XLK) |
13.8% |
19.9% |
Utilities (XLU) |
5.1% |
3.2% |
Value Charges Ahead
In some ways, comparing the value of growth is like the fable of The Tortoise and the Hare. If that’s the case, the former is making its move as the latter naps.
The S&P 500 cap-weighted index is up more than 10% year-to-date, but the S&P 500 equal-weighted index is almost up 14%.
I think this trend will continue for the foreseeable future.
Fed Parade
Today, the University of Chicago Booth School of Business will host the U.S. Monetary Policy Forum. The program will focus on prospects for inflation with a high-pressure economy. It will be a Fed talkfest galore.
The keynote speech will be given by Richard Clarida, Board of Governors of the Federal Reserve.
The panel discussion on the Future of the Federal Reserve's Balance Sheet includes:
The panel will be moderated by Patrick Harker, Federal Reserve Bank of Philadelphia.
There’s a good chance comments from this event will move markets.
Taxes Too High or People Too Greedy?
Just consider news from around the world this week:I know this isn’t shocking, but no one likes paying taxes. Even rich people that cheer the notion of higher taxes hire armies of folks to help them pay as little as possible.
Yesterday, the French court slammed Swiss Bank UBS with $5.1 billion in fines and damages for its role in helping wealthy French citizens evade $10.8 billion in taxes.
There was news of Danske Bank being under investigation for facilitating the laundering of $230 billion, mostly by Russian citizens through its branch in Estonia yesterday. Without a doubt, Russian billionaires are more active in seeking tax havens and investing money outside their country.
However, the United States loses the most tax revenue to tax havens than any other country by far.
Also, Australia’s Tax Avoidance Taskforce announced this week that it has recouped $7.7 billion from foreign-owned companies, multinational companies, and $4.7 billion from wealthy individuals.
Yes, individuals (many heroes of Millennials and progressives) are just as eager as corporations to not pay taxes.
Last year saw high-profile examples from around the world, including China, where actress Fan Bingbing was fined $70 million for tax evasion, and where soccer superstar Ronaldo forked over $21.6 million to avoid going to jail in Spain.
That said, all of this begs the question: are taxes simply too high and too unfair, or are businesses and wealthy people simply too greedy?
Portfolio Approach
The balance of the portfolio remains the same, but many ideas in the model portfolio are above our buy limit. Meanwhile, there are a couple of malingering ideas that look much better and are attractive buys right now. Make sure to check with your rep or research@wstreet.com.
Communication Services |
Consumer Discretionary |
Consumer Staples |
1 |
3 |
1 |
Energy |
Financials |
Healthcare |
1 |
1 |
1 |
Technology |
Utilities |
Cash |
2 |
0 |
2 |
Industrial |
Materials |
Real Estate |
4 |
4 |
0 |
Today’s Session
It will be interesting as all eyes are on the Fed and the White House, where President Trump is meeting with vice premier of China at White House. The race against the clock is moving faster, and while there is a general feeling things will work out, its by no means guaranteed.
Comments |
Are taxes too high already? In our regressive Tax system the rate go up to steeply for the middle income joint family filers. 47.5% pay no Federal Tax so how is that fair. Everyone should pay something even if it is $100.00 Should the 1% be taxed higher? Taxes on the uber rich can be higher and I would set a type of alternative minimum tax on gross incomes above the current top tax bracket. Or, have a surcharge that applies. Should taxes for everyone be lowered? The flat tax with pre bates for those at or below the poverty level plus x% could solve a lot of our Tax issues. If the Tax system was fair and across the board consistent we would have enough revenues for a prudent operating budget if Govt would truly eliminate the duplication, frivolous programs, waste and fraud. Go to a zero based budgeting system. garro on 2/22/2019 10:24:18 AM |
Are taxes too high already? No, I don't think so. Should the 1% be taxed higher? Possibly, but not much more above what the rates are now. Should taxes for everyone be lowered? No. They were lowered a little for now in the last tax cut and I barely noticed the difference. Brian Bigelow on 2/22/2019 10:33:46 AM |
Top 1% pay 43% of taxes. Top 20% pay 87% of all income taxes. If this group is taxed more it will hurt job creation. Key is to actually cut spending . Larry one of the forgotten men. Thanks for all of your fine work. Larry Hayes on 2/22/2019 10:37:29 AM |
Taxes are too high for all; in CA and NY the upper middle class are paying more than 50% of gross income to taxes and it is killing their economies. El Zorro Oro on 2/22/2019 10:50:55 AM |
Charles, taxes are too high. If Bill Gates, nancy PELOSI, Warren Buffett, colonel Bernie SANDERS, ALL WANT HIGHER TAXES, THEN TAKE THEIR BILLIONS OUT OF TRUST FUNDS. SELL ALL THEIR ASSETS AND DONATE IT TO EVERY USA CITIZEN AS A FINANCIAL TOOL TO HELP USA CITIZENS ALL races, parties, veterans, ANY & EVERY USA CITIZEN OF ANY AGE. LOWER TAXES FOR EVERYONE, PUT TERM LIMITS ON CONGRESS& SENATE MEMBERS,& PASS A LAW LEGAL USA CITIZENS CONTROL THE VOTE ON IF OR WHEN CONGRESS& SENATE GET ANY PAY RAISE OR ADDED EXPENSE ACCOUNT FUNDS, USE BLOCKCHAIN TO ASSURE VALIDITY. LIFE IS GREAT INVEST LONG. BUT KHZ OUCH, BRKA OUCH, EVERTHING ELSE IS A GREAT BULL MRKT 2019, WE STILL BELIEVE USA GDP 3.125% FOR THE YEAR. Ed on 2/22/2019 11:14:57 AM |
Property taxes, in particular, should be controlled. The Elderly are being taxed out of their homes. Something similar to CA.'s Prop 13 should be put in place, where property taxes may not be raised beyond a certain level without a vote of the people. Sales tax, or a flat tax, where everyone shares in the burden, is the fairest way to go. Emery Haggin on 2/22/2019 11:46:10 AM |
Taxes are already too high but no matter what % they are, giving more $$ to the government is like giving drugs to an addict. They are not good stewards of our $$ and the waste is incredible. Dick Denecker on 2/22/2019 11:54:53 AM |
Like Ibn Khaldun wrote in the 14th century, when the citizens of a nation do not believe they are getting value for the taxes they pay, that nation will fall. I believe that, besides defense, two crucial responsibilities of government are maintaining an environment where families can prosper and correctly making use of tax proceeds. Patricia Flynn on 2/22/2019 5:35:03 PM |
As President Reagan said it, "We do not have a taxing problem, we have a spending problem."... LOL... If we are not heading towards 0% then it is out of control... Andrew B Newallo on 2/22/2019 6:49:53 PM |
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