Infrastructure Bill's Effects on Markets and Cryptocurrency

Infrastructure Spending

This week the Senate passed a bipartisan infrastructure bill with a cost of $1T. The amount stems from left over Covid-19 American Rescue Plan funds coupled with a proposal to report and tax cryptocurrency transactions. The Congressional Budget Office reports it will add $250B to the existing budget deficit. Half the bill is new spending and not part of any other legislation or previous spending program. Some non-traditional infrastructure items are being funded such as expanding and improving broadband/internet access and eliminating lead pipes in schools and daycare centers. Also included are some climate change initiatives like electric car charging stations and new electric powered school buses. 

Democrats plan to use a legislative process called Reconciliation to pass another, broader infrastructure bill and budget that will expand the definition to include more climate change initiatives, expansion of Medicare, funds for caregiving for the elderly, extending the child tax credit, free community college and many more promises of the Biden campaign. The cost so far in this bill is $3.5T in additional spending.  

All these bills have a long way to go and might not be officially passed until later in the Fall, so don’t hold your breath. However notable, the first $1T bill was passed with 69 votes including 19 Republicans. The follow-up $3.5T moved forward with just 50 all Democratic votes.  

 

Inflation?

The impact on markets of all this spending? To some degree, markets have discounted the expectation of a change in federal government spending by pricing it into markets already as the Nasdaq has been lagging behind in big tech especially.  

A major concern with exponentially increased federal spending is increased inflation. The news on inflation this month is that it is still increasing but at a slower rate from previous months and lower than economists expected.

The $1T bipartisan infrastructure bill also brings cryptocurrency transactions under a more structured and regulated umbrella. It is an interesting idea because one rationale for the genesis of cryptocurrency is to be outside the regulatory constraints. Cryptocurrency trading platforms and other players in cryptocurrency are adapting by moving more formally into the institutional financial world. Will this defeat the attraction to crypto? We shall see.

A footnote going forward is that the federal debt limit will expire at the end of August and needs to be extended. The chicken fight has begun. Each time this becomes a political tug of war, it has ended with one bad outcome. During the Obama years, the US sovereign debt- US Treasuries- was downgraded from AAA. This could impact markets going forward.  

 

Life and Living

Also, some parenting advice around technology and screens. Take a look at what you should not say and better ways to say those same things. The reconstruction of common phrases creates a less degrading dialogue about technology for your child and offers healthy alternative options to sitting in front of a screen.

There is an interesting article from Psypost linking stress on romantic relationships in those who base their self worth on their financial success.  “During this project, we noticed consistent associations between basing self worth on finances and feeling less related and connected to other people.” It’s interesting, and not surprising that due to the focus and importance of finances in our society that the question of ‘self worth’ would lean synonymously with personal financial success. Wealth can take on so many forms, such as experiences, relationships, and mental state. The definitions are vast and broad and yet a common measurement we cling to is ‘financial wellbeing’ when it comes to measuring self worth.  

As your advisors, this is why we focus on the whole person when planning for our client’s desired outcomes. Rather than isolating the micro-picture of your financial portfolio, we recognize that everything is connected and use a holistic vantage point, giving highest precedence to your life portfolio. We’re interested in how you spend your time, money, energy and attention which helps us assist the whole person, the whole you! Finances are just one piece of your picture and our role for you isn’t limited to dollars and cents, especially when we know sometimes the best decisions aren’t always the best financial decisions.

 

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