Child Tax Credit
The market is a pricing mechanism for future expectations, positive or negative. The market then prices that in. Something we don’t believe is being priced in is the increase in child tax credit to $2,000 per child, an $800 increase. If you have children it’s more likely that $800 that has been saved will go back into the economy. We think that this $800 additional credit will be a positive bump in consumer confidence as people meet with their accountant and a positive bump for spending as they receive those checks. To put it into perspective, if you take that $800 and multiply it by the number of children, roughly 75 million per last census in 2010, that’s $60 million plus.
In recent weeks there has some weakness in housing imports. A lot of that has to do with the higher interest rates. People have been asking us recently, “Is the housing market going to be a part of the next recession, are prices going to go down, and is housing going to cause a downturn in the markets?” In the past 5 recessions, since 1980, 3 of the 5, home prices went up. In 1990, one of the down years, prices only fell by 1%. In 2008, the other time, it was due to risky mortgage lending. No guarantees, but historically home prices don’t necessarily cause recessions or downturns in the market.
As we have discussed in previous vlogs including last weeks, #339 Client Q&A, is how consumer spending leads to company earnings. We are in the midst of earning season right now. It’s really important to keep an eye on this because of how markets were down in the 4th quarter, including a bad December. So why does this matter? Were the markets down because of perceived weakness and now we are getting unexpected earnings. Or, was it priced in correctly? We could potentially see some positivity from this area.
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