This week, Madison Business Review contributor Bryce Roth gives a recap of what’s been happening in the business world and the stock markets.
A global tax deal, inflation and a Senate law all played a role in pushing markets last week.
The S&P 500 and the Nasdaq Composite ended the week in the green, advancing 0.41% and 1.5% respectively. The Dow Jones Industrial Average turned red and fell -0.80%. Nonetheless, all three indices are up more than 9% for the year, continuing a strong rebound after the pandemic.
The end of tax havens?
The Group of Seven (G7) agreed on a global deal minimum tax rate which aims to prevent companies from evading tax laws established in their country of origin.
Since tax laws vary from country to country, companies have pushed their profits to foreign subsidiaries with lower rates, potentially saving billions of dollars. However, the proposed rate could remedy this. It seeks to tax 15% on corporate profits globally, no matter where a business is located. According to the New York Times, it is now at the G-20 to accept the idea.
However, this deal can be hotly debated as low-tax paradise countries – like Ireland – could suffer serious consequences and “holes in their budgetIf large companies decide to leave. Ireland has long been a tax haven to which many companies have fled, such as Apple; deny the United States tax money on their corporate profits. The purpose of this deal is to get companies to move overseas while keeping their money in the United States.
Inflation at its highest
With the trillions of dollars spent on the stimulus, fears of controlling inflation have been driving markets for some time. On June 10, it was announced that US inflation increased by 5% from a year ago – the largest increase since the last recession almost 13 years ago.
With that, one should expect higher prices for most consumer purchases. One-third of the increase in the Consumer Price Index (CPI), which measures inflation, is attributable to the prices of cars and trucks.
In May, other key indices for furniture, air fares and clothing also increased.
These numbers can be worrisome at first, but it’s important to note that annual measures of inflation are compared to numbers from last year during the pandemic. As the economy recovers from the drastic price cuts of the past year, the 5% jump is valid. The Federal Reserve defines this as a base effect, one reason why this shouldn’t worry investors too much.
Technology bill changes course on China
Last week, Senate lawmakers approved a huge $ 250 billion bipartisan bill, the Law on Innovation and Competition, to stimulate technological research and production. About $ 50 billion of the bill will be turned over to the U.S. Department of Commerce to boost semiconductor development, a problem in recent months.
However, the main purpose of this bill became evident when Chuck Schumer, the Senate Majority Leader, mentionned: “I believe that this legislation will allow the United States to innovate, to produce and to compete with the world in the industries of the future.”
Including certain provisions specific to China, it is understood that the law is intended as a solution to increasing Chinese competition. With a Senate split evenly between Republicans and Democrats, the law passed 68-32, signaling that the United States is actively focused on fighting China on these particular issues.
China has since denounced the bill and issued a statement expressing disappointment at the way the United States is advertising the bill. the National People’s Congress said that “this bill seeks to exaggerate and expand the so-called Chinese threat to maintain US global hegemony … and deprive China of its legitimate development rights.” Tensions between the United States and China continue to be high – the bill appears to be stoking the flames.
GameStop sees its revenues skyrocket
Four JMU students joined a huge internet collective and made tens of thousands of dollars investing in the rising stocks of GameStop and AMC Theaters. Here are their stories.
GameStop’s earnings were better reported than expected, with revenue of $ 1.28 billion, up 25% from last year. The company increased its cash reserves by selling nearly $ 552 million of its shares in the previous quarter and used that to reduce debt. Even with better-than-expected earnings, it’s hard to justify the 1,506% increase in GameStop shares. However, it’s worth a look at whether GameStop can sustain the growth in its revenue and stock price.
Alzheimer’s drug has met with the wrong response
The United States Food and Drug Administration (FDA) recently approved a drug that is believed to help fight Alzheimer’s disease. More … than six million adults suffer disease, a leading cause of death in the United States
It is the first drug approved to fight the disease in over 18 years; however, there is currently a big debate about the fast-track approval of this drug.
“Fast Track Approval isn’t meant to be the backup you use when your clinical trial data isn’t good enough for regular approval,” Dr. Kesselheim said via Twitter. Three FDA advisers have resigned on recent approval, and the backlash the FDA is receiving doesn’t seem to be going away anytime soon.
Bryce Roth is a senior in finance. Contact Bryce at [email protected]