| | | | | | | Presented By Blockchain.com | | | | Axios Markets | | By Dion Rabouin ·Apr 27, 2021 | | Good morning! Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,280 words, 4.8 minutes.) 🎙 "The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - See who said it and why it matters at the bottom. | | | | | | 1 big thing: Gearing up for a big week |  | | | Illustration: Sarah Grillo/Axios | | | | Concerns about higher taxes and inflation pushed the S&P 500 to its first weekly loss since mid-March last week, but Monday began where that week ended with stocks moving higher. What's happening: While traders are largely looking past inflation worries, even after last week's IHS-Markit purchasing managers index showed yet another record high reading for prices, company executives are not. - More S&P 500 companies (47) have cited the term "inflation" on their earnings calls for Q1 2021 through this point in time than during any quarter in more than 10 years, data from FactSet show.
On the other side: Earnings have been even better than expected so far, but reactions have been fairly muted. More than three-quarters of the S&P 500 companies that have reported results so far have beaten analysts' estimates, according to data compiled by Bloomberg, yet the S&P gained just 0.2% while the Dow closed 0.2% lower. - S&P 500 companies are on track to report a net profit margin of 11.6% for Q1, which would be the third-highest net profit margin reported by the index since FactSet began tracking this metric in 2008, trailing only Q3 2018 (12.0%) and Q2 2018 (11.7%).
What to watch: Investors also are awaiting earnings from Amazon, Facebook and Apple due later this week, though Tesla's stock fell after reporting stronger-than-expected numbers in its report after the bell on Monday. - "We're gearing up for a busy week on all fronts," Chris Larkin, managing director of trading and investing product at E-Trade Financial, told Bloomberg.
- "Big tech earnings, a look into Q1 GDP, and the Fed meeting could create catalysts for market moves. Though despite the strong earnings reports we've seen thus far, the market is really taking beats in stride amid already high valuations."
Don't sleep: Asset managers continue to warn that stock valuations look worryingly high, but as I wrote yesterday, so far in 2021 the biggest risk to equity investors' returns has been selling. - The S&P's forward 12-month price-to-earnings ratio currently sits at 22.3, well above its 5-year average (17.9) and its 10-year average (16.0), again approaching highs last seen during the dot-com bubble.
What's next: Today the Fed begins its two-day policy meeting and the market largely expects chair Jerome Powell to double down on his doublespeak that the economy is improving but still requires 0% interest rates and $120 billion a month of bond-buying assistance. - However, investors will be watching for any sign that the central bank could start to reduce, or taper, the program sooner than expected.
|     | | | | | | 2. Catch up quick | | UBS said it lost a larger than expected $774 million from the implosion of Archegos Capital Management last month, but managed a 14% profit increase to $1.82 billion for the quarter. (WSJ) Fully vaccinated Americans will be allowed to travel to EU countries this summer, European Commission President Ursula von der Leyen said, noting the U.S. is making huge progress toward herd immunity. (NY Times). President Biden will sign an executive order on Tuesday, requiring federal contractors to pay a $15 dollar an hour minimum wage. (Axios) | | | | | | | | 3. Tesla reports strong earnings, but traders are unimpressed |  Data: FactSet, company filings; Chart: Will Chase/Axios Tesla's latest earnings report beat expectations handily, thanks largely to its investment in bitcoin and regulatory credits, but the stock fell by as much as 3% in after-hours trading. By the numbers: Tesla reported revenue of $10.4 billion and a record-high $438 million in net profits. The company said it made $101 million from the sale of some of its bitcoin holdings after investing $1.5 billion in February. Of note: Axios' Joann Muller highlights that the electric carmaker achieved record production and deliveries, despite supply chain challenges that have roiled the industry. Watch this space: CEO Elon Musk said Tesla was able to weather the chip shortages and supply chain issues in part by "pivoting extremely quickly to new microcontrollers, while simultaneously developing firmware for new chips made by new suppliers." - Musk also reaffirmed that overall delivery growth is expected to exceed 50% this year, even though the company reported zero production of its Model S and X with some deliveries from existing inventory.
- Musk also said Model S deliveries will start in May and the Model X in Q3.
| | | | | | | | A message from Blockchain.com | | Blockchain.com: The fastest, easiest way to buy bitcoin | | |  | | | | Worried that you missed the boat on Bitcoin? Good news: it's not too late to be early. With Blockchain.com you can easily buy and sell cryptos like BTC, ETH and DOT, earn over 4% annually with Interest Accounts and swap crypto for other cryptos. | | | | | | 4. The college degree barrier to work |  | | | Illustration: Aïda Amer/Axios | | | | Axios' Erica Pandey writes: There are millions of Americans who have the skills to get higher-level, higher-paying jobs but aren't considered for those roles because they don't have college degrees. Why it matters: Companies hire based on credentials, not skills — and that's limiting the economic mobility of millions of skilled workers without degrees and leaving firms with smaller pools of talent. Among American workers without college degrees are 77 million that do have high school diplomas, according to an analysis by the research and advocacy organization Opportunity@Work, provided exclusively to Axios. 55% of Hispanic workers and 65% of Black workers fall into this pool. - And even though as many as 30 million of these workers have the skills to earn more, they're often stuck in lower-wage jobs because of degree requirements, says Byron Auguste, CEO of Opportunity@Work.
- "It's an enormous part of our talent pool, and it's a pool that's really undervalued to a damaging extent," says Auguste, who also served as deputy director of the National Economic Council in the Obama administration.
Driving the news: Around 75% of the new jobs that were added to the U.S. economy between 2008 and 2017 required college degrees or higher, but nearly two-thirds of the labor force is composed of workers without college degrees. That's because making higher education a requirement has turned into a quick way for employers to find candidates with soft skills, like management or communication, even though these skills can be acquired elsewhere, per a Harvard Business School study. - Case in point: 41% of recent college grads are in roles that don't require college degrees, per the New York Fed.
- College degree requirements stagnate millions of careers and make the labor market inefficient by keeping qualified people out of higher-level jobs, per the Harvard study.
The stakes: During the pandemic, workers without college degrees have disproportionately lost their jobs, and many of those jobs — such as in food service and hospitality — won't come back. - Those people will need to find new jobs in new fields, and that will be hard to do unless employers do away with degree requirements where they can.
| | | | | | | | 5. Biden committed to capital gains tax hike for the rich | | Axios' Hans Nichols writes: President Biden is committed to increasing capital gains taxes for the richest Americans when they die, before they pass wealth to their heirs, according to people familiar with the matter. Why it matters: Eliminating the so-called stepped-up basis is central to Biden's plan to find additional revenue to pay for the roughly $1.5 trillion in new spending he'll unveil during a major speech Wednesday night. - "It is important to tax gains at death when you raise the maximum capital gains tax rate," said Leonard Burman, of the Urban Institute's Tax Policy Center. "Otherwise, rich people would go through contortions to hold assets until death and avoid the 43.4% (plus state tax) rate."
- "If you are also ending step-up basis at death (as Biden proposes), the revenue-maximizing rate is much higher — plausibly above 43.4%," wrote Jason Furman, a Council of Economic Advisers chairman for President Obama, wrote on Twitter.
Driving the news: Ahead of Biden's joint address to Congress, officials are stressing his plans are designed to target the ultra-wealthy. - It's "not the top 1%, it's not even the top one-half of 1%," Brian Deese, the director of the National Economic Council, said of the president's capital gains proposals.
- Deese also sought to rebut arguments that nearly doubling the capital gains rate would slow economic growth.
- "There is no evidence of a significant impact of capital gains rates on the level of long-term investment in the economy," he said.
The intrigue: During the campaign, Biden proposed increasing estate taxes from 40% to 45%, while also dramatically decreasing the exemption from tax-free inheritances from $11 million to $3.5 million. - Using the stepped-up basis means that when assets are passed to an heir, they are reassessed — for future tax purposes — at their current value.
- In practice, that means an asset's increase in value is never taxed as capital gains in the original owner's lifetime, though estate taxes could still apply upon the owner's death.
| | | | | | | | A message from Blockchain.com | | Blockchain.com: The fastest, easiest way to buy bitcoin | | | | | | | | Worried that you missed the boat on Bitcoin? Good news: it's not too late to be early. With Blockchain.com you can easily buy and sell cryptos like BTC, ETH and DOT, earn over 4% annually with Interest Accounts and swap crypto for other cryptos. | | | | Thanks for reading! Quote: "The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." Why it matters: On April 27, 1667, English poet John Milton sold the copyright to his internationally renowned epic poem "Paradise Lost" for 10 pounds to publisher Samuel Simmons. - Milton was blind and had fallen on hard times, but was paid five pounds upfront and a further five pounds if and when each print run sold out.
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