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NestEgg News - August 2021 Thumbnail

NestEgg News - August 2021



With summer drawing to a close, we want to share some commonly asked questions over the past couple months.


Will home prices continue to climb?

Yes, but not as quickly as they have in the past 18 months (on a national level). As the charts below show, new home and existing home sales are softening. 

 The COVID Mortgage/Rent relief will soon end and will likely result in some of the affected homes coming onto the market, increasing housing supply.

 Locally is a more difficult answer. The national slowing trend influences us as well, but there are still a lot of disgruntled Californian’s (especially in light of the current fires). We are starting to see houses sit on the market longer than they were 6 months ago. We have also noticed an increased number of price drops as people moving in are no longer willing to pay cash at astronomical prices above the appraised value. 


Source: Charles Schwab, Bloomberg, as of 6/30/2021

 

Source: Charles Schwab, Bloomberg, as of 6/30/2021

Why is the stock market so high?

Where else in the world would you invest right now than America? Sure, we didn’t roll out the vaccine as smoothly as we would have liked, but at the end of the day, who created the best vaccines? Who created the best technology for quarantining at home (Netflix, Grubhub, Amazon, …)? 

 Additionally, the $1,900,000,000,000 infrastructure spending proposal will be very stimulative for our economy and markets.


Will we have a market correction?

Yes, but no one knows when. Cyclically, September and October are the most volatile months of the market, while November and December are two of the best months. We can’t time the market; we just have to be patient when it gets sassy.


 Will the delta variant affect our markets?

Maybe. The new variant is certainly something to be taken seriously from a medical perspective. Currently, we think it will have much LESS of an impact on the market than the original virus last year.


How high will inflation get?

Inflation has been well covered in the news. Lumber, semiconductors, appliances, cars, … have all seen significant cost increases as supplies have failed to keep up with demand. We would not be surprised to see moderate inflation on the horizon, but NOT the high levels expressed by the media.

 

Will the proposed tax increases be implemented?

Maybe. There has certainly been a loss of momentum around increases to income tax, estate tax, and capital gain tax rates so widely discussed at the beginning of this year. We will have to wait another 90 days or so to see if this issue is prioritized again.

 

What is happening in China?

President Xi has taken a baseball bat to the kneecaps of Chinese technology and education companies. This represents a stunning blow to the Chinese capitalistic miracle as Charlie Munger (Warren Buffet’s longtime partner) has said. Xi seems committed to limiting future rapid wealth creation that companies like Alibaba, TikTok, Didi and Tencent have provided. This could result in Chinese entrepreneurs leaving China to pursue their economic dreams.

 

How should I invest?

We recommend investing in several highly select low cost and tax efficient exchange funds. Minimize your exposure to individual stocks. As you get close to retirement consider adding bonds, risk managed exchange funds and consumer funds. 


Tax Rebate?

Starting next week, some Idaho taxpayers will be getting one-time tax rebates. The rebates are part of tax relief legislation passed by the Idaho Legislature and signed into law by Gov. Brad Little earlier this year. The one-time rebates will go to full-time Idaho residents who filed income tax returns in 2019 and 2020. Each person will get either a minimum of $50, plus $50 for each dependent, or 9% of the state income tax they paid in 2019, whichever is greater.

 

"Idaho's economy continues to blow past projections,” Little said. “We are leading the country in economic prosperity. This year, we achieved the single largest tax cut in state history! We've returned your tax dollars with our record budget surplus."

 

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We trust you found this review to be educational and informative. 

 Let us emphasize it is our job to assist you. If you have any questions or would like to discuss any matters, please feel free to call us.

 As always, we are honored and humbled you have given us the opportunity to serve as your financial advisors.

 

Eric & Kelly

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