Inflation's effect on stocks... Will it have one? If the first half of the year were a hashtag, it would be #flated. For most of the year, investors worried that the Fed would raise interest rates sooner than expected to tamp down rising prices as the economy revved up (see: our chart above). This month, the Fed suggested it would do just that (ETA: 2023). Higher interest rates can make stocks less attractive compared to less risky assets like bonds and savings accounts. Despite the #flated sitch, stocks are at records highs. But if inflation starts to look like a trend rather than a one-time reopening blip, that could change.
Big tax hikes for corporations... Will they actually happen? This month, G7 countries came to a historic agreement: multinational companies should pay a minimum tax rate of at least 15% in each country in which they operate. That could hurt Big Tech companies like Google and Amazon, who've been plopping their international HQs in countries with low corporate tax rates. Meanwhile, President Biden wants to raise the corporate tax rate in the US to 28% from 21% to fund trillions worth of proposals. Neither of these tax hikes have passed yet, and they'll likely get pushback — but they've become more likely.
Economic competition with China... Can the US stay #1? With its tech power and growing international influence, China’s becoming a bigger economic threat to the US economy. This month, the Senate approved a $250B bill to subsidize Made In USA R&D for key industries of the future (think: tech, chips). The bipartisan goal: keep the US competitive against China. Then, G7 countries announced “Build Back Better World”: a Biden-inspired partnership to rival China's "Belt and Road" initiative by financing infrastructure projects in developing countries.