Market Waits For Inflation Reports As DC Increases
Spending and Taxes    
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Yesterday the US SENATE PASSED THE “INFLATION REDUCTION ACT,”
WHICH REALLY INCREASES GOVERNMENT AND TAXES. The opposite fiscal and
government policy we need now!

I don’t like to rant, but I think it important that our readers
understand the economic consequences of this insanity. (Scroll down
for all the points of it)

Turning to the market…The start of August was more erratic for
stocks after a relatively bullish month of July. Retail investors
continue to be driven by FOMO (Fear of Mission Out), while many
institutional investors are skeptical of the recent market climb, if
not bearish.

However, both are very anxious about the rate at which central banks
WILL NEED TO RAISE INTEREST RATES TO RECLAIM CONTROL OVER INFLATION.

The results earnings season for the year’s first half has finally
been overall very positive, which was inevitable. Tech continues to
get crushed, and an increasing recession cloud is starting to hit.

S&P 500 SECTORS

US EMPLOYMENT NUMBERS

The US employment figures on Friday report reported 528,000 jobs were
added and as the unemployment rate declined slightly to 3.5% This
shows that the labor shortage would not improve, and wages are
continuing to grow. However, there is a huge gap between wages and
inflation.

I THINK THIS MAKES THE FEDERAL RESERVE UBER HAWKISH AND LIKELY TO PUSH
RATE INCREASES UNTIL WE SEE A 5% UNEMPLOYMENT NUMBER. Many have used
the number to question if we are in a “recession.”

We know that rising inflation is here, and the Fed is considering it
priority number 1 over the stock market and the economy.

Consumers do appear to be tightening their belts and increasing credit
card spending. Companies like Netflix will likely be seen as a
luxury. AT&T REPORTED THAT PEOPLE ARE NOW FALLING BEHIND IN PAYING
THEIR PHONE BILLS.

INFLATION REDUCTION ACT – INCREASE GOV’T & TAXES BILL

The US Senate passed the “Inflation Reduction Act” on Sunday, and
it is going to the House. In typical government fashion, the name is
very MISLEADING AS IT ACTUALLY BLOATS THE SIZE OF GOVERNMENT AND
INCREASES TAXES.

Americans For Tax Reform
[[link removed]] did
a great breakdown of the bill and its effects. Here are the key
points:

* $6.5 Billion Natural Gas Tax Which Will Increase Household Energy
Bills
* $12 Billion Crude Oil Tax Which Will Increase Household Costs
* $1.2 Billion Coal Tax Which Will Increase Household Energy Bills
* Corporate Income Tax Hike on U.S. Businesses Which Will Be Passed
on to Households
* $124 Billion Stock Tax Which Will Hit Your Nest Egg — 401(k)s,
IRAs, and Pension Plans
* 95% Federal Excise Tax on American Pharmaceutical Manufacturers
* $52 Billion Income Tax Hike on Mid-Sized & Family Businesses
* Add 87K IRS Agents, Supersizing the IRS to Increase Audits – $124
Billion

One of the key things is that it hurts many investors and people when
they retire. Under the new law, Democrats will levy a new federal
excise tax on Americans who decide to sell shares of stock back to a
firm, lowering household savings’ value. Any person with a 401(k),
IRA, or pension plan will have their retirement funds harmed by tax
increases and restrictions on company buybacks.

THE BOTTOM LINE IS THAT IT WILL RESULT IN MORE GOVERNMENT SPENDING,
which will lead to more inflation. This is exactly the opposite of the
title of the bill. There may be some opportunities for investors to
buy stocks related to this bill in green energy.

PELOSI TAIWAN/CHINA

Meanwhile, NANCY PELOSI’S TRIP TO TAIWAN HAS STRAINED TIES BETWEEN
THE US AND CHINA, ELIMINATING ANY CHANCE OF WASHINGTON LOWERING ITS
TARIFFS ON BEIJING, WHICH MIGHT HAVE HELPED CURB PRICE HIKES. China
continues to due battle drills, but there doesn’t appear to be any
military action that has caused an exchange of “gun fire.”

CALENDAR & KEY MARKET DRIVERS

* Inflation Reduction Act
* Wednesday, August 10 – Consumer Price Index (MoM) (July)
* Thursday, August 11 – Initial Jobless Claims

INFLATION IS EVERYTHING THIS WEEK. The headline estimate for the CPI
report for July is anticipated to moderate somewhat from +9.1 percent
in June to +8.7 percent Y/Y. On a month-over-month basis, Core CPI is
projected to increase by 0.6 percent.

IT IS ANTICIPATED THAT USED CAR COSTS AND PLANE FARES WILL ALSO
DECLINE OVER THE COMING MONTHS, RELIEVING SOME OF THE STRAIN ON
AMERICAN CONSUMERS. (We are already seeing prices decline.) With a
slowdown from the 1.1 percent pace in June, the producer price index
is predicted to rise by just 0.3 percent in July. PPI is anticipated
to rise by 0.4 percent month over month, excluding food, energy, and
trade services.

In economists’ opinion, the price reports may contribute to
discussions about peak inflation. Still, they will also reinforce the
widely held belief that the Federal Reserve will increase its target
interest rate by 75 basis points at its meeting in September.

The University of Michigan will release its report on the state of
American consumers in August on Friday, August 12. The night of August
9 to 10 will see the release of Chinese inflation data for July in
other parts of the world.

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SINCERELY,

Irving Wilkinson

Editor

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