This month, Madison Business Review contributor Bryce Roth provides a recap of what happened in the business world and stock markets.
There’s truly been madness this past March, as the major indices have almost doubled from a year ago. If government stimuli, monetary policy and vaccine trends continue while COVID-19 cases decline, markets should excel in 2021.
Vaccines aid in economic recovery
With Biden announcing a goal of 200 million vaccine shots in his first 100 days, states lifting COVID-19 restrictions and the Centers for Disease Control and Prevention relaxing traveling regulations, public optimism has revived.
“I know it’s ambitious, twice our original goal, but no other country in the world has even come close — not even close — to what we’re doing,” Biden said in his first press conference as president.
Markets are benefitting immensely from this, with the S&P 500 increasing 6.67% this month. Meanwhile, jobless claims have been going down — another good sign for the economy.
Infrastructure plans promise lots
Also on Biden’s agenda are tax hikes and an infrastructure bill.
Biden signed a $1.9 trillion stimulus package March 11, and now aims to sign an infrastructure bill worth around $2 trillion. The plan includes spending $621 billion on transportation infrastructure, $650 billion on quality of life improvements — such as ensuring clean water for all — and $400 billion on caregivers. Also, $300 billion will be dedicated to research and development, especially in the realm of green energy.
Both Trump and Biden spoke of an infrastructure bill. Biden’s proposed tax hikes would be the main source of funding, looking to raise the corporate tax rate to 28% from 21%, gross income tax to 39.6% from 37% and the capital gains tax for individuals earning at least $1 million annually at the regular income tax rate of 39.6%.
This is somewhat controversial, as both Republicans and Democrats have debated it for some time now: Although it may stunt future economic growth, it may also help stunt the growing deficit.
Federal Reserve in control
The Federal Reserve had a major impact on markets in March 2020 and it’s no different this time. Interest rates are still around 0-0.25%, asset purchases have increased and been consistent and GDP is looking to increase 6.5% for this year. Inflation is expected to rise over 2%, while the bank leverage exemptions were lifted on April 1.
The Federal Reserve also kept markets in check this month when Treasury yields were rising and calmed markets with positive commentary about inflation, GDP and employment expectations. Although the Fed didn’t release trillions of dollars of stimulus this March, it’s still making moves that are pushing markets in the right direction.
Meanwhile, jobless claims were one of the major economic indicators that performed well this month. Jobless claims hit 684,000 in March, almost the lowest since the pandemic started. Although it’s near an all-time low, 684,000 is still relatively high, holding unique implications for the future as markets continue to return to pre-pandemic levels.
Consumer confidence was reported better than expected March 30. The metric measures the level of consumer trust in economic activity and is a leading indicator in predicting consumer spending. Consumer spending is roughly 70% of GDP.
Cryptocurrency surges onward
March has been a fascinating month for cryptocurrency, and especially Bitcoin and Ethereum. Bitcoin went from around $48,000 to over $59,000 this past month. This 22% increase was driven largely by institutional support coming from many companies — especially Tesla. Ethereum went from roughly $1,500 to over $2,000, which seemed impossible to many.
Elon Musk, the world’s wealthiest man, is using Twitter to help his followers make a quick buck. By giving market-moving shoutouts to popular stocks and cryptocurrencies like GameStop, Bitcoin and Dogecoin, the Tesla and SpaceX CEO is showing his influence and power as he flexes his social media muscles.
Apart from institutional investment, increased adoption of cryptocurrency by retailers and payment platforms has also helped drive the surge. As cryptocurrency is becoming more of a viable payment option, investors are taking note.
Bryce Roth is a junior finance major. Contact Bryce at email@example.com.
Disclaimer: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I’m not receiving compensation for it, and I have no business relationship with any company whose stock is mentioned in this article.