According to data from EPFR Global, investors are funneling billions more into U.S. stock funds than Chinese ones. Why is that? Well, EPFR’s Director of Research, Cameron Brandt, seems to think it’s because a lot of investors believe there is more play in America right now because of stimulus checks. Looking back, by the time U.S. stocks plunged in March of 2020, not only was China onto controlling the spread of COVID, its economy was growing again. Brandt says that while China funds got the “initial jump,” the U.S. has come “roaring back.” In other news, while JPMorgan and Wells Fargo may have had their first strongest quarters in a decade, they’re not celebrating yet as President Biden’s corporate tax plan looms over their heads. The 28% tax increase (from 21%) is creating a lot of uncertainty for companies.
Investors pour more money into U.S. stocks than China’s as interest comes ‘roaring back’
Investors are putting billions of dollars more into U.S. stock funds than Chinese ones, according to data from fund research firm EPFR Global.
“The baton seems to be getting handed over,” said Cameron Brandt, Director of Research at EPFR, in an interview Friday. “A lot of investors think the short-term play is the U.S., where the stimulus is ramping up, versus China, where there are signals a more prudent take will be taken, especially in the second half of the year.”
U.S. stocks plunged in March 2020 as worries about the coronavirus pandemic’s impact on economic growth gripped the markets. By that time, China was on its way to controlling the domestic spread of the virus and the economy returned to growth in the second quarter.
Now, roughly a year out, global investors are reassessing their outlook on both countries.
Since U.S. President Joe Biden took office in late January, the White House has launched an additional stimulus of $1.9 trillion and announced a $2 trillion infrastructure spending plan. The Biden administration has also maintained a tough stance on China, which creates a political overhang for U.S. investment in Chinese assets.
But in a global context, U.S. and China stock funds are the two regions that have attracted the most inflows from international investors over the past two quarters, Brandt said.
“Both fund groups have seen a significant jump in interest since the middle of last year,” he said. “China funds got the initial jump but U.S. came roaring back.”
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Fox Business/Suzanne O’Halloran
Biden’s corporate tax plan gives CFOs earnings angst
The upcoming first-quarter reporting season, which kicks off Wednesday with JPMorgan and Wells Fargo, may be the strongest in more than a decade, according to John Butters, senior earnings analyst at Factset. But instead of popping the champagne, chief financial officers are prepping to handle some tough questions on President Biden’s corporate tax plan.
Goldman Sachs, in a client survey, noted their investors want CFOs to discuss, among other things, “the potential negative EPS impact if the new tax reform proposal by the Biden administration is adopted,” according to the team led by David Kostin, chief U.S. market strategist. If it sails through Congress, earnings growth in 2022 could dive to 5% from 12%, the firm forecasts.
“There is a tremendous amount of uncertainty for companies,” Jon Traub, Deloitte’s Tax Policy leader, tells FOX Business as details around the plan remain uncertain along with its future in Congress. Even so, he notes, companies are still prepping for change. “CFOs are asking V’s of tax to model various scenarios,” he explained while noting the impact won’t affect every company the same. “For some companies, it will be a bit hit, for others not as much.”
Biden’s plan, in its current form, would take the corporate tax rate to 28% from 21%, the level established in 2017 by then-President Trump when he slashed it from 35%.
Behind the scenes, many corporate chieftains are banging the drum against the hike.
“Seventy-five percent of CEOs said that an increased tax burden on U.S. companies would negatively affect their company’s investments in R&D and innovation, 71 percent said it would negatively affect their ability to hire, and nearly two-thirds said it would result in slower wage growth for U.S. workers,” said Business Roundtable Tax and Fiscal Policy Committee Chair Gregory Hayes, chief executive officer of Raytheon Technologies, in a survey released Monday.
Continue reading, here.
Reuters via CNBC/Reuters Staff
Gold edges higher as dollar dwindles after U.S. inflation data
Gold prices inched higher on Wednesday, extending gains from the previous session after data showing a bigger-than-expected rise in U.S. inflation boosted bullion’s appeal as a hedge against it and weighed on the dollar and Treasury yields, according to Reuters.
Spot gold rose 0.2% to $1,747.49 per ounce by 0125 GMT. U.S. gold futures were steady at $1,747.40 per ounce.
Consumer prices in the United States soared by the highest in more than 8-1/2 years in March, setting off what most economists expect to be a fleeting spell of higher inflation.
The U.S. dollar fell to three-week lows, making gold cheaper for holders of other currencies, while benchmark 10-year Treasury yields also inched down.
Concerns posed by a suggestion of U.S. health officials to delay the use of Johnson & Johnson’s COVID-19 vaccine also supported safe-haven gold.
The U.S. economy could expand by 5% to 6% this year, boosted by increased vaccinations and solid fiscal assistance, but the Federal Reserve will not withdraw its funding just yet, Philadelphia Fed President Patrick Harker said.
The European Central Bank should spell out its tolerance for overshooting its inflation target, ECB policymaker Francois Villeroy de Galhau said on Tuesday.
China’s exports rose sharply in March while imports growth surged to the highest in four years.
Bitcoin reached a new high of $62,741 on Tuesday, continuing its 2021 run to new heights just a day before the listing of Coinbase stock in the United States.
Silver rose 0.4% to $25.42 and palladium was flat at $2,689.44. Platinum was up 0.8% at $1,165.72.