Quote of the Week

“The two most important days in your life are the day you were born and the day you find out why.” – Mark Twain

Tech Corner

Last week the markets were down a little bit less than one percent. The market certainly has stalled recently. We don’t anticipate a decline from here, and our data provider thinks the markets still have a positive bias going forward for the next few months, possibly until June. We are cautious at this moment, and we want to protect the gains we have made this year. As I have said before, we are always managing your assets with one foot out of the door.

From a technical standpoint, we are still in Quad II which is good for commodities and the stock market and bad for fixed income. I find it interesting that the Nasdaq performance is up only +2.54% year to date. The high-flying tech stocks that made such impressive gains last year are starting to pull back from their exaggerated highs.

Last week the US Census Bureau announced a disappointing report for February US retail and foodservice sales. Retail sales decreased by -3.0% last month compared to January. The decrease in sales was felt across almost all sectors of the economy. The only sector with positive month-over-month sales growth was gasoline stations, probably due to higher gasoline prices. The most significant decrease was felt by non-store online shopping and auto sales. We don’t think this a precursor to a stalled economy for two reasons. First, the weather was horrible in February, and the $1,400 stimulus checks are just starting to hit the mailboxes of people who will probably spend the money.

So, we stay the course by maintaining our position in the stock market and commodities and avoiding the bond market except for high yield bonds.

Larry’s Thoughts

The Covid-19 Relief Bill was signed into law recently. I found a great explanation of the bill in Time Magazine. It is worth reading. I have reprinted it for your convenience.  Here is the link to the article as accessed today:

President Biden Just Signed a $1.9 Trillion COVID-19 Relief Bill Into Law. Here’s What’s In It



President Joe Biden’s signed the $1.9 trillion American Rescue Plan into law on Thursday afternoon – the first major legislative victory of his tenure and a landmark piece of legislation he and his advisers are hopeful will help the country emerge from dueling public health and economic crises.

“This historic legislation is about rebuilding the backbone of this country,” Biden said as he signed the bill at his desk in the Oval Office. “That’s what the essence of this is.”

The House of Representatives had passed the Senate’s amended version of the COVID-19 relief package on Wednesday afternoon. The bill was passed almost entirely on party lines, with just one Democrat, Rep. Jared Golden, breaking from his party and voting against it. No Republicans voted for the bill.

Biden will host a signing ceremony on Friday afternoon, White House Press Secretary Jen Psaki wrote on Twitter.

The avalanche of federal dollars, which clock in at approximately 9% of the country’s gross domestic product (GDP), includes $1,400 checks for middle- and lower-income Americans, extends unemployment insurance through much of the summer, and provides $70 billion to increase vaccine distribution and coronavirus testing. The bill was passed entirely along party lines, with all Senate Democrats supporting it and all Republicans opposing.

The House had already passed a version of the bill on Feb. 27, but had to vote again after the Senate amended several provisions.

In the coming weeks, Biden Vice President Kamala Harris and other administration officials will travel the country promoting the bill. “As the President often said during the campaign, “help is on the way,” and with the Rescue Plan passed, the American people can be confident in knowing that the help they need will be there for them,” White House deputy chief of staff Jen O’Malley Dillon wrote in a Wednesday memo to senior staff. “That will be the distillation of our message to the American people in the coming weeks, that help is here for them and their families.”

Here is a look at six major components of the bill.

Direct payments for millions of Americans

Under the Senate plan, individuals making up to $75,000 and couples making up to $150,000 per year are eligible to receive a $1,400 check. Individuals earning between $75,000 and $80,000 and couples earning between $150,000 and $160,000 will receive some of that money, but not the full amount.

The eligibility thresholds are a change from the House’s initial version, which capped the threshold at $100,000 for individuals and $200,000 for couples. Senate Democrats lowered the eligibility for the stimulus checks to get all Democrats on board after resistance from some moderates in their party.

The decision means that an estimated 17 million Americans who received a check under former President Donald Trump won’t get one under Biden, according to a study from the nonpartisan Institute on Taxation and Economic Policy.

Biden said on Saturday that the government will begin sending the checks to eligible Americans this month.

Extended unemployment insurance

Current federal unemployment benefits, which allot an additional $300 per week on top of state benefits, are set to expire on March 14. The Senate’s bill extends the program through Sept. 6, at $300 per week. For households earning under $150,000, the first $10,200 of the unemployment benefits are nontaxable to prevent surprise billing at the end of the year.

These were also changes from the House version of the bill, which provided $400 per week through August 29. The reduction in unemployment insurance in the Senate’s version was implemented to ensure moderate Sen. Joe Manchin, a Democrat from West Virginia, would not break with his party, according to a Democratic aide.

Expanded tax credits for families

The bill raises the child tax credit for most families in the coming year by $1,000, to $3,000 per child. It’s even more for families with young children: many can receive a credit of $3,600 for each child under age six. All of these credits are fully refundable, and some researchers say these measures could potentially help cut child poverty in half.

Funding for state and local governments and public schools

The bill delivers a $350 billion cash infusion to state and local governments, and $130 billion to elementary, middle and high schools to help them re-open safely.

Local budgets have faced steep declines in revenue as businesses remain shuttered during the pandemic. Last September, the Brookings Institute estimated that state and local revenues would decline by $155 billion in 2020, $167 billion in 2021 and $145 billion in 2022. The money for schools is designed to help them improve their ventilation systems, hire more janitors, and reduce class sizes to conform with social distancing protocols.

Democrats argued that this money was necessary to save public sector jobs and enable teachers and students to return to classrooms without risking their health. Republicans said that the funding already allocated through last year’s relief bills was sufficient, and that sending more money to state and local governments was superfluous.

Relief for restaurants

The bill includes an additional $50 billion in assistance for small businesses, including more than $7 billion for the troubled Payment Protection Program.

In a break from previous relief packages, this bill provides $28.6 billion in grant relief specifically for restaurants, which have been particularly decimated by the pandemic. According to a January 2021 analysis from the National Restaurant Association, the industry’s sales for 2020 were $240 billion lower than the pre-COVID-19 forecast, and over 110,000 restaurants had temporarily or permanently shut their doors across the country.

“This is a decisive moment for the independent restaurant and bar community,” Erika Polmar, Executive Director of the Independent Restaurant Coalition, said after the bill passed the Senate.

COVID-19 testing and vaccine distribution

The bill allocates $20 billion in funding for vaccine distribution, including $1 billion for the Centers for Disease Control and Prevention (CDC) to launch a vaccine awareness and engagement campaign, and $7.5 billion for the CDC to set up vaccination sites across the country and monitor distribution. The bill also includes $50 billion to increase COVID testing.

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These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

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