Investment Commentary – October 13, 2021

Year to Date Market Indices as of October 13, 2021
• Dow 34,229 (12.29%)
• S&P 4,352 (16.15%)
• NASDAQ 14,546 (13.05%)
• Gold $1,732 (-8.87%)
• OIL $74.76 (54.44%)
• Barclay Bond Aggregate (-2.80%)
• Fed Funds Rate 0-0.25 (0-0.25)
• Annual Inflation Rate 5.4% (As of 8/11/21)

Social Security benefits to jump 5.9% in 2022 in biggest increase in 40 years

Retired Americans who collect Social Security are about to get the biggest “raise” in 40 years: A 5.9% increase in their monthly payments starting in January.
The biggest increase in the cost-of-living adjustment for Social Security since 1982 is a bit of a double-edged sword, though. It going up so much because U.S. inflation is running at the highest rate in at least a decade or more.

Consumer prices have climbed 5.4% in the 12 months ended in September.

If inflation tapers off next year, as the Federal Reserve predicts, seniors could get a small windfall. Yet if inflation remains high they won’t benefit nearly as much.

Cost-of-living adjustments are based on formula tied to the consumer price index. The government made it official after the release of September CPI report.

The average Social Security beneficiary receives about $1,565 a month this year. The scheduled 5.9% increase in 2022 would amount to $92 a month — or $1,104 extra over a full year.
That works out to $1657 a month for the average retiree.

Benefits rose just 1.3% in each of the prior two years, but inflation was also a lot lower. The annual COLA increase is meant to help seniors keep up with inflation.

Nearly 70 million people received Social Security or related benefits in 2021. That’s about one-fifth of the overall population.

The annual cost of living increase is determined by taking the average rate of inflation from July through September and comparing it the same three-month period a year earlier, using an index known as the CPI-W.


House approves debt limit increase that will last through part of December, sends bill to Biden

The House of Representatives on Tuesday approved a bill to raise the U.S. debt limit, the final legislative hurdle to averting a first-ever national default.

The bill now travels to President Joe Biden’s desk for his signature and enactment. It will allow the Treasury Department to pay the nation’s bills until early December.

The legislation is the result of an deal between congressional Democrats and Republican leader Mitch McConnell, and would lift the debt ceiling by $480 billion.

The House of Representatives on Tuesday approved legislation to raise the U.S. debt limit, the final legislative hurdle to averting a first-ever national default that was otherwise expected to occur next week.

The bill, passed by the Senate last week, now travels to President Joe Biden’s desk for his signature and enactment. He is expected to sign it later this week and likely Wednesday.

The legislation, which cleared the House with a party-line vote of 219-206, is the result of an agreement between congressional Democrats and Senate Minority Leader Mitch McConnell, R-Ky., and would extend the debt ceiling by $480 billion.

The current national debt is $28.4 trillion and would be permitted to rise to about $28.8 trillion.

While the president is widely expected to sign the bill, failure to do so would result in economic calamity by Oct. 18, Treasury Secretary Janet Yellen has warned.

The president’s top economic advisor told CNBC earlier in October that she would “fully expect” a U.S. recession if the government ran out of ways to pay off its bills and triggered an unprecedented default.

Debt ceiling suspensions or extensions do not authorize new government spending, but allow the Treasury Department to pay for appropriations Congress has already approved.

The debt limit extension is expected to allow the government to cover its expenses at least through Dec. 3, House Speaker Nancy Pelosi, D-Calif., said during a press conference Tuesday morning. Some recent reports suggest the $480 billion increase could last Congress further into December.

News Around The web:

Hard-fought gain: In another week of choppy trading, the major U.S. stock indexes recovered from a sharp decline on Monday to finish positive overall for the week. With gains of around 1%, the Dow and the S&P 500 outpaced the NASDAQ; large caps outpaced their small-cap peers and the value equity style outperformed.

Debt deal: A congressional agreement reached on Thursday to lift the U.S. debt ceiling averted a potential default on the government’s debt obligations, but the deal was merely a short-term one, so another debt deadline looms in early December. The deal followed weeks of partisan fighting and came less than two weeks before the government faced the likelihood of being unable to pay its bills for the first time ever.

Earnings outlook: As major banks prepare to open third-quarter earnings season this week, the number of companies raising their earnings forecasts is outnumbering those that are reducing expectations. As of October 4, 56 companies had recently lifted their guidance compared with 47 that cut their forecasts, according to FactSet. Typically, more companies cut their guidance rather than raise it prior to earnings season. (Market Indices) (This day in Financial History) (Around the Web & Upcoming Events) (YTD Performance Chart)