Global Economy Set to Surge, Corporate Tax Issues, the Economic “New Normal”
Zacks Investment Management provides insight into the biggest news stories, and key factors that we believe are currently impacting the market such as:
- The status of global economic growth
- A different version of the economic “new normal”
- Weighing potential increases to corporate tax rates
- U.S Services sector springing back to life
Is Global Economic Growth Ready to Surge? The International Monetary Fund (IMF) thinks so. According to recently revised estimates, the IMF is pegging global economic growth for 2021 at +6%, which would mark the largest year-over-year increase since at least 1980 (when it started collecting data). To be fair, +6% global GDP growth is coming off very weak comparisons from 2020, when the global economy shrunk by -3.3% as a result of pandemic-induced lockdowns. The United States and China, the world’s two biggest economies, are driving the rebound, but we would expect to see a “rolling global recovery” as vaccines become more broadly available worldwide and as the economic risks of the pandemic fade. 2021 will likely be a unique year in the realm of growth, as U.S. consumer has accumulated some $1.3 trillion in savings, interest rates remain relatively low (and will likely remain relatively low), and though inflationary pressures are likely to surface, inflation should remain in check for the year. The question for investors is, how much of this growth surge is already priced into stocks.1
As the economy recovers, investors are seeking more financial options, especially those who are trying to build their retirement portfolio. Many investors may be wondering where to turn for a lower-risk, income producing investment?
We recommend a viable option, preferred securities, that pay regular dividends and avoid the price volatility of common stocks. Sometimes called “a stock that acts like a bond,” preferred securities offer a fixed dividend that is often higher than the company’s bonds. As you plan your retirement, we want you to feel secure in a strategy that meets your financial goals. In our Zacks’ Preferred Income Strategy Guide, we provide helpful information so you can learn more about this investment option.
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free copy:
Learn About Zacks’ Preferred Income Strategies!2
A Different Version of the Economic “New Normal” – Over the last year, businesses big and small have made several changes to adapt to what has been termed the economic “new normal.” Investing in digital infrastructure, embracing remote work, expanding ‘to-go’ and takeaway services, and so on down the line. There have also been hundreds of regulatory adjustments made to drive efficiencies – allowing healthcare providers to cross state lines which meant easing interstate licensing rules, allowing restaurants to sell to-go cocktails, and expanding the allowance of online services like document notarization and marijuana sales. Many economists and prognosticators were predicting that the economy would be forever changed, but the reality may be more nuanced. Large U.S. corporations have indicated they are planning to keep urban center office space, but may downsize the amount of commercial real estate they lease or own. There is also a call for lawmakers to keep many of the loosened regulations in place, which could indicate a ‘reset’ for how small businesses operate but not a wholesale change.3
Weighing Potential Increases to Corporate Tax Rates – The U.S. Treasury Secretary, Janet Yellen, made headlines this week in calling for a global minimum corporate tax rate. The argument for a global minimum tax on corporations is not a new one – the previous Treasury Secretary, Steven Mnuchin, had been part of international negotiations involving 100 countries. The idea behind a minimum global corporate tax is to disincentive companies from moving operations from a relatively higher tax country to a lower-tax country, in other words creating a system where corporations would not actively seek solutions to lower their tax burdens. The Biden administration is proposing an increase in the corporate tax rate from 21% to 28%, which would place the United States at the top end of countries with relatively higher corporate tax rates. If the Biden administration pushes forward with its plan without a global minimum tax rate, it faces the possibility of creating a potential tax disadvantage for U.S. corporations. These talks are ongoing and complex, with progress slowed by the pandemic, but will be a key factor to watch in the coming year. Finance ministers from the G20 said they hope a deal could be reached by mid-year.4
The U.S. Services Sector Springing Back to Life – The U.S. services sector, which makes up a lion’s share of overall economic activity, surged at its fastest pace on record in March. The data goes back to 1997, which means it encompasses several periods of robust economic growth. The U.S. manufacturing sector followed suit, with factory activity rising to its highest level in 37 years. All signs are pointing to a demand-driven resurgence in economic activity, which is creating ‘good problems’ in the supply chain. Production-capacity constraints and material shortages may continue to drive delivery delays, but overall, the report indicates that economic activity is accelerating.5
Where to Turn for a Lower-risk, Income Producing Investment? – While we can’t predict or control the future of the market, there are ways you can better plan and protect your investments in retirement. Many investors may be wondering where to turn for a lower-risk, income producing investment? We recommend Preferred Securities, and to help you understand exactly how it can benefit your financial future, we have created a Zacks Preferred Income Strategy Guide.6
This guide will help you learn more about preferred securities and generating cash flow and income with our Preferred Income Strategy. You’ll find helpful information including:
- How preferred securities work and how they differ from stocks and bonds
- Pros and cons of preferred securities for retirement investors
- Why preferred securities can help diversify a portfolio
- The added advantage of preferred securities if a company fails
- Plus, many more reasons for retirement investors to consider this income-generating strategy
If you have $500,000 or more to invest and want to learn more, click on the link below:
2 Zacks Investment Management reserves the right to amend the terms or rescind the free Stable Income, Controlled Risk: The Zacks Preferred Income Strategy offer at any time and for any reason at its discretion.
3 Wall Street Journal. April 6, 2021. https://www.wsj.com/articles/calls-grow-to-abandon-regulations-eased-under-covid-hello-cocktails-to-go-11617718885
4 Wall Street Journal. April 5, 2021. https://www.wsj.com/articles/treasurys-yellen-to-call-for-global-minimum-corporate-tax-rate-11617633701
5 Reuters. April 5, 2021. https://www.reuters.com/article/us-usa-economy-services/u-s-service-sector-activity-index-jumps-to-record-high-in-march-ism-survey-idUKKBN2BS18Y
6 Zacks Investment Management reserves the right to amend the terms or rescind the free Stable Income, Controlled Risk: The Zacks Preferred Income Strategy offer at any time and for any reason at its discretion.
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