Insights

The fourth quarter is likely to exceed 7% once the official data is finalized. If this expectation is correct, 2021 would be the most robust year of economic growth since 1984. The overall level of output now exceeds levels achieved in 2019. So there is good news to celebrate, and real progress in the ongoing recovery. Looking ahead, we expect growth in 2022 to slow but not stall. The path forward will be impacted by a number of key factors.

Happy Holiday Greetings to you! We hope that you and your loved ones are safe and well.

Because the Act contains a large number of spending provisions, the tax provisions generally go in one direction – up. We begin with a discussion of the proposed changes that could impact individuals and families.

First, they will begin to curtail their purchase of government bonds sometime this year, perhaps as early as November. In anticipation of this announcement, intermediate and long-term bond yields have risen in recent weeks, with the 10-year U.S. Treasury Note yield rising to 1.53% vs. 0.68% a year earlier, as of September 30. The Fed has also stated it is willing to tolerate a temporary period of inflation above their target of 2% before raising short-term rates. The Fed is now guiding the market and investors to expect a hike in the federal funds rate sometime in the second half of 2022. After many years of ultra-low (or zero) interest rates, a gradual rise in rates would be welcome for bond investors. Higher yields would translate to more income generated from bond investments, and would also signal a return to more normal financial conditions.

U.S. equities, as measured by the S&P 500 Index, returned less than 1% in the quarter, including dividends, bringing year-to-date performance to +16%. Non-U.S. stocks, as measured by MSCI’s All Country Worldwide Ex-U.S. benchmark, fell 3% including dividends, ending the third quarter up 6% on a year-to-date basis.

As stimulus measures wind down, we expect economic growth to slow, but remain firmly positive. This is good news, as it means the economy is healthy enough to expand on its own, buoyed largely by business and consumer spending.

Sophie Costley served in our Operations Group for 46 years, setting a high bar for the rest of us! Joe Flynn was with Howland Capital for over 30 years as a tax manager. He is still involved with the firm, consulting as our Senior Tax Advisor.

Howland Capital’s Five Core Beliefs When it Comes to Saving for Retirement + Top Ten Recommendations for Saving for Retirement.

While Howland Capital has continued to regularly update you on regarding investment news and the market, as we approach the end of summer, we would like to provide you with a firm update.

With the American Rescue Plan Act, the child tax credit was expanded effective only for 2021.

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.