Equity Overview – Domestic Stock Markets

The three major equity indices all ended positive in April, with the technology heavy Nasdaq reaching a milestone. The Nasdaq Composite Index passed through 6000 in April, taking it 17 years to move from 5000 to 6000. The index has hit 25 new records so far in 2017, the most of any year since 1999.

Earnings remain upbeat for most sectors of the S&P 500 index, instilling confidence into markets. The technology sector excelled in April as improving earnings helped propel the sector. The recent drop in oil prices to below $50 affected the energy sector as tighter margins placed pressure on future earnings prospects. (Sources: S&P, Bloomberg)

Fixed Income Update – Global Bond Markets

Analysts believe that demographical factors are increasingly influencing the direction of fixed income markets. Even after the fed raised rates this past quarter, along with a series of rate increase expectations, bond yields have reversed and headed lower. The 10-year U.S. Treasury Bond yield fell in April to 2.29%, levels last reached in November 2016.

Volume of investment grade bonds has surpassed the volume of high yield bonds for the first time since 2008, suggesting that sentiment about risk factors in the bond markets may be changing.

An exit from any one of the EU member countries is expected to cause additional negative sentiment and market repercussions in European credit markets as the euro becomes that much more susceptible.

Government bonds from Venezuela reached yields in excess of 20%, as the country bristles with political and economic chaos. It is estimated that Venezuela has roughly $10 billion left in reserves, which is expected to be exhausted fairly soon. (Sources: Reuters, Bloomberg, U.S. Treasury)

A Favorite U.S. Export For Foreigners – International Trade

As foreign imports come into question with possible tariffs, certain US exports continue to be in big demand worldwide.

As much as Americans enjoy inexpensive foreign imports, many foreigners enjoy expensive American made products.

U.S. wine makes its way primarily to the UK, Canada, Japan, and Italy, while American beer is most popular in Chile, Australia, Canada, Sweden, and Mexico. U.S. whiskey has become an absolute favorite in Japan, Spain, Australia, and Germany. (Sources: Census Bureau, Distilled Spirits Council of the US)

Trump Tax Proposals – Fiscal Policy

The administration of President Trump released its tax proposals in late April. The proposals did vary somewhat from initial proposals presented during the campaign, but adhered to the basic principals of tax reform of broadening the tax base while lowering tax rates.

Markets are anxious because it may take months before there is an indication whether any portion of the tax proposals actually convert into tax legislative law.

Administration officials stated that the reduction in tax revenue generated by the tax cut proposals would be offset through a combination of anticipated economic growth and various broadening measures.

Once the Budget Proposal for Fiscal Year 2018 is submitted by the White House in mid-May, then Congress will begin the deliberation process of the tax proposals.

Affecting most every taxpayer in the country is the standard deduction. The proposal essentially doubles the standard deduction from its current levels, thus simplifying the entire tax process for many tax filers. This is so because the standard deduction is used instead of itemizing expenses in various categories. The Tax Policy Center estimates that those who itemize would fall from 30% to 5%, hence spending less time on identifying expenses to deduct and less of a burden on the IRS.

Ironically, one of the proposals actually hinders homeowners that have expensive homes, primarily in Democratic California and New York. Senators from both states are expected to rebuff the elimination of the state and local property tax deduction, seen as a significant deduction for residents of these expensive coastal states. (Sources: whitehouse.gov, Tax Policy Center)

National Parks Contribute Over $34 Billion To Economy – Federal Programs

As the summer months approach, the National Parks are a destination for tourists all over the United States. National Parks are part of the National Park Service, which was established in 1916 by President Woodrow Wilson. Beginning with Yellowstone National Park in Montana and Wyoming, there are 417 parks today covering 84 million acres.

On a recent visit to California’s National Parks, newly appointed Interior Secretary Ryan Zinke made mention of the tremendous activity and economic output the National Park Service is generating. The parks operate under the exclusive control of the Secretary of the Interior. The 417 parks saw a record 331 million visitors in 2016, contributing $34.9 billion to the U.S. economy. The economic output is derived from various jobs and industries including lodging, hospitality, retail, transportation, food, fuel, camping fees, and recreational activities. (Sources: U.S. National Park Service)