October 22, 2022 | Dollar Strength, Earning Season, Tax Adjustment, Home Sales & Series I Bonds

Dollar Strength
I see comparisons to the 70s and people say yes with the current inflation we’re going to have a major recession or depression just around the corner. One important area that people are not looking at is the strength of the US dollar. Back in October 1978 the dollar hit an all-time low of 80.52. The weakness in the dollar was very difficult for the United States. I’m sure you’re wondering where it stands today. Roughly 40% higher checking in around 112. There are many benefits to a strong dollar, the most important being confidence from around the world in our currency. It is easy to be emotional and get on the doom and gloom train but they’re just too many other positive factors that tells me we will get through this probably faster than many believe

Earning Season
Earnings season for the third quarter is underway and was kicked off with decent earnings from the big banks. Over the next few weeks, we will be seeing many companies report and investors should be looking at the growth of the earnings year over year along with the guidance going forward. In the last three months analysts have reduced estimates by about 7% which could make the estimates easier to meet. I would also recommend watching the sales along with the price to sales ratio to see how your companies compare with the industry and what investors are paying for the sales of the companies they're invested in.

Tax Adjustment
With inflation comes an upward adjustment of 7% on tax brackets from the IRS. This is the largest increase in automatic adjustments to the tax brackets since it was first indexed to inflation in 1985. The top tax bracket of 37% for a married couple now starts at $693,750 when couples file the tax return in 2023 for 2022 income. The standard deduction will also climb 7% to $ 27,700 for married couples. All tax brackets across-the-board will increase by 7% so taxpayers will not be paying tax on inflation. The estate and lifetime gift tax exclusion will also increase to $12.92 million from $12.06 million per person. Gift tax exclusion will climb from $16,000-$17,000. Unfortunately, all the news is not good, the Social Security administration adjusted their inflation on payroll tax of earnings up to $160,200 from $147,000 in 2021

Home Sales
Existing home sales have now fallen for the past eight months as mortgage rates hit 6.92% and probably will soon crossed over into the 7% range. September sales for existing home sales declined 1.5% in September to an annual rate of 4.71 million homes. The percentage number looks far worse if you look at the September sales on an annual basis, the decline is 23.8%. Home inventories continue to rise which will be the beginning of more price declines in housing prices.

 

Harrison Johnson - "Last Chance for Series I Bonds"