Infrastructure Bill and The US Dollar
November 23, 2021 | Sage Capone
Infrastructure Bill
President Biden signed the new 1.2 trillion-dollar Infrastructure Bill. The photo below provides a good breakdown of some of the designated beneficiaries. The bill combines traditional infrastructure with spending on new energy sources and over 100 billion dollars on digital infrastructure.
Source: Global ETFs
How The Infrastructure Bill Could Affect Your Taxes & Income
Many tax provisions from the bill were ultimately dropped, like an increase in the capital gains tax and the billionaire “mark to market” tax regime.
Source: BlackRock
Some of the few changes that did get through, though, such as the high-income earners’ 8% added surtax. In addition, we may see the elimination of the back-door Roth Conversion which looks like it is scheduled to fade out by 2031.The US Dollar & Inflation
With all the talk about inflation, you might think that the value of the dollar as a median of exchange is at risk. But is it really?
Source: Yardeni Research
That’s not the case at all. The broad effect of the exchange rate is near its 25 year high.
Source: TheChartStore
Despite the aggressive fiscal and monetary stimulus that has occurred, and potentially more, the US Dollar value has not diminished relative to global currencies. In fact, it is right in the middle of its trading range since 2015. Treasury rates may go higher if inflation numbers persist. Yet an interesting dynamic has developed. In 2019, the 10 year treasury rate was higher than it is now, but for foreign investors that hedges the currency risk. The yields are actually negative.
Source: FMRCo/Bloomberg
