A Black Swan Event And Higher Taxes Persist As Financial Risks Amid The Boom

Published Friday, April 2, 2021 at: 7:05 PM EDT

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The job situation report released this morning by the U.S. Bureau of Labor Statistics (BLS) was a good surprise, and the stock market closed at a record high this week.  Amid the boom, however, as the economy recovers from the Covid crisis, it’s wise to consider what could go wrong. 

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First the good news: Total employment rose by 916,000 in March, much higher than the 625,000 net new jobs expected by economists.  The jobs recovery is stronger than expected, reflecting better than expected vaccination rates.

With three million Americans vaccinated daily in recent days, March went out with a roaring jobs boom that knocked the unemployment rate down to 6%, from 6.2% in February, 6.3% in January, and 6.7% in December. 

 “These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic,” according to a BLS press release.

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The stock market was closed today for Good Friday. The Standard & Poor’s 500 stock index closed Thursday at an all time high of 4,019.87. The index gained +1.18% from Wednesday and +1.13% from last Friday’s close. The S&P 500 index is up +56.97% from the March 23rd bear market low.

With the economy recovering faster than expected and the stock market repeatedly hitting record new all-time high prices, it’s wise to consider what could go wrong, what could risk your retirement and how much is left for your family upon your demise. 

Black swan events, like a pandemic, natural disaster, terrorism, or other game-changers are always possible. By definition, you cannot plan for black-swan events. They’re unforeseen, unknown risks that blindside the world. But you can plan on black swans happening. Another financial risk high net worth and high-income individuals are facing right now is higher taxes.

Taxes are a known risk for individuals with more than $400,000 of adjusted gross income. A 6.4% federal tax will be levied on income in excess of $400,000, under President Biden’s proposal. In addition, the estate tax exemption of $11.58 million for individuals, under President Biden’s plan, would be slashed to $3.5 million, subjecting millions of heirs to haircuts on their inheritances. These two taxes might be less damaging by acting now. Amid the economic boom, financial planning is more important because the stakes have been raised by threat of higher taxes.


Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

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