Insights

A recent survey of professional economists conducted by the Federal Reserve Bank of Philadelphia predicts real GDP will grow at an annualized rate of 7.9% for the second quarter, following growth of 4.3% and 6.4% in the prior two quarters. At this rate, the economy will likely exceed the broad level of pre-pandemic output reached in 2019.

U.S. equities, as measured by the S&P 500 Index, returned more than 8% (including dividends) in the second quarter, bringing year-to-date performance solidly into double-digit territory. Non-U.S. stocks, as measured by MSCI’s All Country Worldwide Ex-U.S. benchmark, returned more than 5% in the second quarter including dividends, and is up more than 9% year-to-date.

We expect to see a gradual tapering in the Fed’s bond purchases along with an increase in the federal funds rate, which is the short-term interest rate set by the Federal Reserve. The Fed has pegged short-term interest rates at zero since 2019, which has made income on short-term bonds paltry at best. It has also been buying $120 billion in Treasury and mortgage bonds each month since last June, which has lowered intermediate and long-term interest rates.

This plan contains several proposals for changes to individual income and estate tax law. It is the third of three plans put forth by the Administration. The first is the recently enacted American Rescue Plan, which provided additional economic stimulus. The second is the recently introduced American Jobs Plan, an infrastructure bill.

While part of this rise can be attributed to the improving economy, the rise is also due to the expectation for accelerating inflation.

We continue to make progress in the struggle against COVID-19. The global economic recovery is underway. Corporate earnings are expected to increase, and the outlook is turning more positive. Threats and fears always remain, but the path forward looks bright and global stock markets are generally reacting as such. U.S. stocks, as measured by the S&P 500 Index, returned 6% in the first quarter, including dividends and non-U.S. stock markets, as measured by MSCI’s All Country Worldwide Ex-U.S. benchmark, returned 4% including dividends.

Today, the opposite is true. Vaccines are available, and the infection rate has dropped well below prior peak levels. At the current pace of vaccination, healthcare experts are saying we will be close to “herd immunity” by mid-summer, allowing for further loosening of restrictions. With a new administration and a slim majority in Congress, the Democrats have rolled out an enormous fiscal package to support growth and are expected to pass more legislation later this year. The benefits of the recent fiscal package are targeted towards lower and medium income families who are most likely to spend it. Further fiscal stimulus packages are likely to be partially funded with higher taxes, but we expect any tax increases to be phased in gradually.

Perhaps it brings other milestones into focus that may not have been noticed – but there are many of them. Dusty Howland founded “Blackstone Management” in 1967, over fifty years past, with his son Tony joining 35 years ago to guide the firm (Howland Capital Management) to now oversee over $2.5 billion of assets.

We are writing with an important update regarding changes to the filing deadline for 2020 tax returns.

Bitcoin is a virtual, digital currency (“cryptocurrency”) invented in 2008 by an unknown person or group (under the alias of Satoshi Nakamoto). Supply is fixed at 21 million “coins” that can be sent from one owner to another without central bank or single administrator involvement. Bitcoin transactions are recorded and kept on a transparent, decentralized, and peer-to-peer network, which was developed and is available to all via open-source software. “Blockchain” is the technology underpinning the distributed ledger where all bitcoin transactions are recorded. Bitcoin is the largest cryptocurrency, as measured by the dollar value in circulation, of many types of cryptocurrencies developed using blockchain technology.

Howland Capital is not involved, and has no intention of taking any action, in any of these activities. Recent market unrest involves individual (“retail”) investors organizing on platforms such as Reddit and trading on platforms like Robinhood to buy shares and speculate in stock options in a coordinated fashion. This activity has resulted in unusual volatility in a number of specific stocks. The common thread among the stocks making headlines is that they are all heavily “shorted” by professional investors. In other words, hedge funds are betting against, or “shorting” these stocks because the fund managers, using fundamental research, have high conviction the stocks will fall in value.