Last Thursday, President Biden signed the American Rescue Plan into law. It’s the third stimulus bill passed in the U.S. since the start of the pandemic just over a year ago. At $1.9 trillion, it brings total stimulus to over $4.5 trillion in 12 months.
Below we look at the potential benefits of this bill from three distinct perspectives:
I’m an individual. Will I get a stimulus check?
I own a business. How does the American Rescue Plan help my business?
I’m an investor. How will this additional stimulus impact the economy and my investments?
The burning question for many individuals. Here’s an easy calculator from Kiplinger that will tell you if you’ll be getting a stimulus check. It will also estimate how much you’ll get based on your income and phaseout limits.
Generally speaking, individuals that make less than $75,000 and couples making less than $150,000 can expect to see a stimulus payment soon. This round of stimulus is more generous about the treatment of dependents. The previous stimulus package provided a payment for any dependent under the age of 16. The American Rescue Plan provides a payment for any claimed dependent, no matter the age.
There’s no question that working parents have had an extremely difficult year balancing work with virtual learning for school-age kids. The adjustment to childcare expense credits in the Plan may provide some relief. The credit now covers up to 50% of childcare costs for kids under the age of 13. It used to cover only 20-35% of the costs. The credits begin to phase out after joint income of $125,000 but can be used partially for joint incomes up to $400,000.
There are more than 30 million small business across the U.S. Several programs have been extended or re-funded to continue to assist these businesses. Both the Paycheck Protection Program and the Employee Retention Credit fall into this category.
There is an additional $7.25 billion in funding for the Paycheck Protection Program. The Plan also expands eligibility for the types of business that can apply. In addition, the Employee Retention Credit has been extended. This refundable tax credit helps businesses keep employees on the payroll. The credit is now available until the end of 2021.
There’s also an important new program that benefits individuals and businesses. The Restaurant Revitalization Fund includes $28.6 billion in grants for restaurants that have suffered a loss in revenue during the pandemic.
Ideally, restaurants will also benefit from the large amount of one-time stimulus checks going out to individuals. Let’s all get out and support our favorite restaurants as restrictions continue to loosen.
There’s always debate about the details of new legislation like the American Rescue Plan. But support for individuals and businesses is good for the economy over the near-term. Improvements in things like retail sales and spending on services, along with fewer unemployed and less bankruptcies are good for consumer confidence and the economic recovery. And that is generally good for stocks.
Bonds may struggle in the near term as rates go up in the face of an improving economy. And stock markets may become more volatile in the near term as investors become more selective about where they think future growth will be. We’ve seen this over the past few weeks as the Dow continues to make new highs while the NASDAQ has had a healthy retreat off it’s high.
Many are concerned about inflation. But one-time stimulus checks are not the fuel for 1970s type inflation.
Most believe the administration’s next big piece of legislation will be infrastructure.
At Heritage, we allocate to real assets like infrastructure, real estate and land. These real asset investments can benefit from higher future prices and a nationwide investment in infrastructure. Read our 2021 Market Outlook for more detail about what we expect from the markets this year.
And of course, from a financial planning perspective, we are keeping an eye on how any new legislation may impact tax laws, so we can get ahead of these planning opportunities for our clients.
Kristin Castner, CFA
At Heritage Kristin is responsible for overall marketing strategy, with a focus on communicating the firm's message to clients and prospects and creating outreach programs to engage clients, partners and prospective clients.