Stock indexes remain steady. The Fed keeps interest rates near zero. And President Joe Biden pledges not to raise taxes on Americans making less than $400,000 a year. Here's how the headlines could affect your money.
Markets stalled Wednesday as investors digested news from the Federal Reserve. The S&P 500 closed almost exactly flat. The Nasdaq dropped 0.3%. The Dow Jones Industrial Average dropped 0.5% after disappointing earnings results from Amgen and Boeing.
The S&P rose to a new record high on Thursday morning, propelled by gangbusters earnings results from index headliners Apple and Facebook.
The Federal Reserve did what many market-watchers expected on Wednesday, continuing its easy money policy despite strong economic growth numbers. Chairman Jerome Powell indicated that the central bank would maintain near-zero interest rates and continue buying bonds to support the post-pandemic economy. He gave no indication that these policies would end anytime soon.
While the prospect of continued Fed support is good news for investors, indexes slid after Powell noted that certain measures "reflect froth" in the stock market. (More on that below.)
Video by Stephen Parkhurst
Biden announced his tax plan in a Wednesday-night address to Congress, which included a promise to the middle, upper-middle, and professional classes. "I will not impose a tax increase on any American making under $400,000 a year," he said. "But it's time for corporate America and the top 1% to pay their fair share."
Biden's plan includes a bump in the top marginal tax rate from 37% to 39.6%, as well as a higher capital gains tax rate for households that earn more than $1 million a year.
Some tax experts are skeptical that Biden's plan won't affect at least some folks who fall under the $400,000 a year earnings threshold. One concern: White House Press Secretary Jen Psaki said in March that the threshold would apply to families, sparking speculation that individual filers earning less than $400,000 could get dinged.
Froth is Wall Street lingo for a state of widespread investor enthusiasm that pushes investment prices beyond what fundamentals would indicate those investments are worth. When stock prices are considered unsustainably high across the board, markets are said to be "frothy."
Although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.
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