Welcome to the inaugural edition of Axios Markets. I'd like this to be a conversation, rather than a lecture, so please be in touch — firstname.lastname@example.org and my colleague here in New York City, Courtenay Brown, email@example.com.
A little about me: I'm originally from Denver but don't ski, speak four languages (English, Spanish, Portuguese and French — in that order of fluency), consider both fixed income and FX more interesting than equities, and know that Tupac Shakur is the greatest rapper who has ever lived.
#Breaking this morning:
Illustration: Rebecca Zisser/Axios
A 12-month certificate of deposit at some U.S. banks now pays more than a 10-year U.S. Treasury note.
Why it matters: Since the financial crisis, Americans looking to earn money by saving rather than investing have been out of luck as interest rates available at banks have hovered at close to zero. But those days are over. At least for now.
"For those that are seeking out top-yielding accounts this is the first time in a decade that you’ve been able to earn a return on your investment that’s above the rate of inflation. You’re talking about preserving the buying power of your money, which is really a big deal."— Greg McBride, chief financial analyst at Bankrate.com.
Our thought bubble: With increased volatility in the stock market, and with the knowledge that a 12-month CD would have outperformed the S&P by a full 8 percentage points (!!!) in 2018, expect more managers to start singing the praises of cash. This could in turn pull more money out of the stock market.
Confidence about the state of the global economy is falling fast, but investors largely remain convinced that business will be good in the U.S.
But, but, but: When it comes to their own business, leaders are signaling strength. A full 91% of small and midsize companies said they plan to maintain or increase their capital expenditures this year. Further, 81% of midsize companies expect their revenue/sales to increase in 2019 and 74% expect higher profits. Among small businesses, 60% expect revenue/sales growth and 58% expect to see higher profits.
Our thought bubble: Business confidence rose to all-time high levels in 2018, particularly among small businesses. Surveys from CNBC and the National Federation of Independent Businesses, both showed record reports of optimism last year. So, those numbers pulling back a bit shouldn't be that much of a surprise.
The Federal Reserve has forecast raising U.S. interest rates twice this year but Fed fund futures rates show almost no one is betting they'll go through with it.
Why it matters: The moves in the Fed funds futures market suggest investors are positioning for a major economic event that forces the Fed's hand.
There's been a lot of talk about new House Rep. Alexandria Ocasio-Cortez's proposal to raise tax rates as high as 70% on America's wealthiest citizens.
Be smart: Here's what she actually said during her interview with "60 Minutes" on Sunday
"You know, you look at our tax rates back in the '60s and when you have a progressive tax rate system, your tax rate, you know, let's say, from zero to $75,000 may be 10% or 15%, etc ... But once you get to, like, the tippy tops, on your 10 millionth dollar, sometimes you see tax rates as high as 60 or 70 percent. That doesn't mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder you should be contributing more."
Go deeper: A full plan would presumably have new tax brackets, but since Ocasio-Cortez only provides a couple examples in her response, we'll work with the current tax plan, cap the current highest tax bracket of 37% at $500,001-$10,000,000 and add a presumed tax bracket starting at $10,000,001 that's taxed at 70%.
Why it matters: An American making $11 million per year filing as single would pay $4,365,687 in taxes under the United States' marginal tax code rather than $7,700,000, which would be paid if the tax rate were a flat 70%, as some have suggested. That's a difference of more than $3.3 million annually.
Reality check: One could also assume that like in the '60s and '70s (and today), America's ultra rich would find ways to dodge much of that onerous tax bill should this highly improbable proposal ever become law.
Bonus reality check: Ocasio-Cortez has been a member of Congress for less than a week so maybe we can dial back talking about her tax plans for a bit.
A trader most definitely overreacting. (Photo: Drew Angerer via Getty Images)
U.S. stocks went on a torrid rally after Friday's bodybuilder-strong jobs report, but the reaction likely has more to do with a bounceback from a historically bad December than the jobs data.
The big picture: As our Courtenay Brown writes, the strong job gains are indicative of a healthy labor market, but it's a lagging indicator. More forward-looking data points, such as Thursday's Institute for Supply Management’s manufacturing data have raised red flags about the health of the economy.
Be smart: That red flag may be a bit of a red herring. As Greg Ip of the Wall Street Journal points out:
Chairman Eddie Lampert and co. are apparently playing hardball with rights to the Sears Twitter handle.
Thanks for reading. Catch me on "MSNBC Live with Stephanie Ruhle" today at 9:30 am.