5 Solid Quality ETFs To Buy Now

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After hitting fresh highs on speedy economic recovery bets, Wall Street has been showing weakness lately as negative fundamentals have started building up.

Firstly, inflationary pressures have been rising, resulting in surging yields and in turn fears of overvaluation, leading to a sell-off in the high-beta and high-growth stocks. Secondly, Biden’s first major federal tax hike proposal since 1993 made investors jittery. The tax hike plan will weigh on companies’ earnings and equity allocations in the short term.

Biden is widely expected to raise the corporate tax rate to 28% from 21% but keep it below the pre-Trump level of 35%. The new administration is also looking to increase the top marginal tax rate to 39.6% from 37% and taxing capital gains and dividends at a higher ordinary income tax rate. Goldman strategists expect higher corporate taxes to cut the S&P 500 earnings by 3% in 2022 while a JPMorgan Chase team also projects it to be a “drag on earnings growth and buybacks.”

Additionally, the third wave of coronavirus has hit Europe hard with extension of lockdown measures in several countries. India has also been reporting rising virus cases despite vaccinations. The resurgence of the infection could have an impact on Wall Street in the coming weeks. Further, the latest comments from Fed Chairman Jerome Powell are also weighing on investors’ sentiment. The central bank said that it would gradually roll back its monthly bond purchases as the economy continues to improve. The Fed currently purchases $120 billion in bonds per month.

However, rapid COVID-19 vaccinations, progress on more vaccines, and an unprecedented stimulus have been the major catalysts for the stock market. President Joe Biden this month signed a massive $1.9 trillion new stimulus. The rounds of solid upbeat economic data indicate a stronger-than-expected recovery.

The United States added 379,000 jobs — the highest since October — in February while unemployment fell to 6.2%. U.S. manufacturing activity increased to a three-year high last month with acceleration in new orders. Consumer spending rose the most in seven months in January while construction spending surged to a record high, boosted by strong private and public outlays. Strong corporate earnings, as well as signs of a healing labor market, also bode well for economic growth.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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