Death and Taxes

The Noise

• The UK government announced radical new climate change commitments designed to cut carbon emissions by 78% by 2035. The proposal would bring forward the current target by 15 years and would require a doubling down on investment in green industries and changes in behaviour and diets.
• US President Joe Biden is reportedly set to propose a tax hike on the wealthiest Americans. The proposal would raise the top marginal rate and increase taxes on investment gains for the richest with a purported 43% levy on capital gains tax. The proposal prompted a selloff in equity markets this week as investors looked to lock in capital gains before potential hikes to the rate.
• Despite rising case numbers in parts of the world, some positive economic news was revealed on Monday: global consumers have stockpiled $5.4tn of savings since Covid-19 began. Reports suggest booming consumer confidence once economies reopen as pent up demand is unleashed into reopened businesses. Whilst a number of nations are nearing this stage, much of the world is still struggling with the virus.

The Numbers

After weeks of strength, markets have taken a pause to contemplate this week as investors weigh Biden’s proposal for higher taxes on the wealthy to fund his new social plan. With equity sentiment somewhat stretched, it doesn’t take much for markets to consolidate and the stall this week is perhaps overdue after weeks of relentless drives upwards. These proposals have always been in the pipeline since Biden’s election as President and we will likely be hearing more on this topic over coming weeks.

Whilst the UK and US have been rolling out vaccinations successfully and their economies are reopening, much of the world is still deep in the midst of its battle with the virus. Cases have been surging in India, the Philippines, Japan and parts of Europe, serving as a stark reminder that whilst we in the UK may be experiencing a gradual return to normality, much of the world still has a long way to go; the global recovery it not quite full steam ahead.

Companies have begun to report their recent earnings to the market and so far our businesses have demonstrated that they are on track as expected and continuing to deliver to our investment case. In a market where valuations are already stretched, it is encouraging to see our businesses report earnings which live up to the high standards markets are currently holding them to.

Those of you who numbed your senses following the reopening of pubs may have missed it; the European Super League came and went like a thief in the night. The proposed league would entail twelve of Europe’s leading clubs establishing a new midweek competition. Of course, we should laud the united front put up by fan groups around the world against a fundamentally uncompetitive and blatantly greedy coup, but there is more. We should take solace in the fact that my dreams of Oxford United winning the Champions League fair and square are still intact, if still very remote.

Source: bbc.co.uk