At last, the Senate, House, and the President have passed the latest $1.9 trillion stimulus bill. It looks great for the typical middle-class family. Let's take a look at the key benefits of the $1.9 trillion stimulus bill.
Key Benefits Of The $1.9 Trillion Stimulus Bill
1) Individuals earning up to $75,000 a year and married couples earning up to $150,000 will receive the full $1,400 per person, including $1,400 per child/dependent. This money should reach approximately 90% of households.
2) A $300 federal boost to weekly jobless payments through September 6, 2021. This is down from $400/week. However, extending through September 6 is huge because by then, any adult American who wants a vaccine should have been able to get one months earlier.
3) The first $10,200 worth of unemployment benefits payments are tax-free for households with annual incomes less than $150,000.
4) The Child Tax Credit increases from $2,000/kid to $3,000/year per kid between ages 6-17, and $3,600 per kid between ages 0-6.
In other words, a middle-class family of four with two kids under 6 should receive (2 X $3,600) + (4X $1,400) = $12,800 in benefits with the first $10,200 tax-free. And if one parent is out of work, she or he will earn an additional $1,200 a month in enhanced unemployment benefits until September 6. Not bad!
This stimulus bill is very focused on helping middle-class families.
Parents Need Help
The struggle for working parents to make ends meet is real. Working with kids at home is difficult. Working outside the home with kids may be an impossible situation without help from relatives or friends.
My wife and I have been stay-at-home parents to two kids under 4 since the pandemic began. We don't have traditional jobs, but I made a promise to publish three posts a week and write this newsletter once a week until everybody I know gets fully vaccinated. It is my way of not letting the virus defeat us.
For example, this Sunday morning my day started at 5:30 am writing this newsletter before the kids woke up. Then it was non-stop tag-team childcare until 8 pm because infants and toddlers need to be watched every minute until they go to sleep. It's often a war between parents and children as to who can stay awake the longest!
I've got to imagine many other working parents are struggling with exhaustion and juggling work and family duties as well. Therefore, despite the pork in the bill and the additional debt, I'm pleased with this latest stimulus package.
Eventually, we will pay back the debt during better times. For now, we've got millions of people to help. The universal basic income feature for parents with dependents is a huge lifeline. By September 6, 2021, most of the adults who want vaccines will have been vaccinated.
I would be shocked if schools don't reopen in full by September 6, 2021.
How Does The $1.9 Trillion Stimulus Bill Help Investors?
If you are like us and aren't receiving any financial help from the latest package, take solace in knowing the package should help corporate profits down the road. As investors, we are invested in the stock market, real estate market, and various alternative assets that should benefit from the latest stimulus bill.
Further, if you are looking to negotiate a severance a move on to a new career or take a break, the latest stimulus bill increases the value of severance packages. The reason is due to the additional $300 a week of enhanced unemployment benefits that last unit September 6, 2021.
After all, a severance package is valued based on the sum of all its income streams. Therefore, if you've been thinking about leaving a job you don't like for a while, 2021 is the year to negotiate a severance and be free. I've updated my severance negotiation book for 2021+ in its 5th addition.
The Federal Reserve Was Honest About Inflation
In early March, Jerome Powell spooked the stock market by telling the truth about inflation. He said, “We expect that as the economy reopens and hopefully picks up, we will see inflation move up through base effects,” during a Wall Street Journal conference. “That could create some upward pressure on prices.”
We all know inflation has been running much higher than the base or target 2% rate for a while now. Powell also said inflationary pressures won't be enough to spur the central bank to hike interest rates.
Bottom line: I will continue to buy the dips in the S&P 500. For example, last week, I sent in the remaining $7,500 to my daughter's 529 plan for this year. Further, I continue to be bullish on real estate.
Carefully Track The 10-Year Bond Yield
If the 10-year yield gets to 2% within the next three months, I expect to see a 10%+ correction in the S&P 500 and a slight slowdown in real estate demand. However, I also believe real estate outperforms stocks the most when stocks are down 10% – 15%. The ideal scenario is if the 10-year yield rises to 2% some time in 2022, rather than this quick ascent we've experienced this year.
I hope all this coverage in the media about the 10-year yield has made people realize why it's the most important indicator to follow.
In my post, The Proper Safe Withdrawal Rate, I was getting bashed by so many random readers about how the 10-year bond yield was irrelevant for returns. Or they somehow misunderstood I believed retirees should have all their investments in Treasuries. That's incorrect.
For the dissenters, the 10-year bond yield is intertwined with all risk asset returns.
Build your wealth and then spend your wealth as you see fit in your lifetime. It would be a shame to make so much money during this bull market and not spend it on improving the quality of your life!
More Stimulus Packages Ahead
I remain bullish on both stocks and real estate. The economy will continue to recovery and open up. There is a huge amount of pent-up savings that is waiting to be unleashed over the next couple of years.
Further, there should be another stimulus package or federal government infrastructure project to get more people back to work.
Old economy stocks should outperform new economy stocks for the year. Meanwhile, I'm still investing in rental properties and real estate crowdfunding opportunities around the country.
Let the stimulus packages continue!
Regards,
Sam