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Market Timing 3rd Quarter 2021
State of U.S. Federal Finances

For the first time in history, the national debt exceeds the gross domestic product (“GDP”). This didn’t even occur in 2008 to 2009 during the “Second Great Depression”. National debt is $28 trillion while Gross Domestic Product is $21 trillion - national debt is 134% of GDP.   Furthermore, US Federal Revenue is about $3.86 trillion AND we’re spending just under $7 trillion or TWICE our revenue; while our national debt is $28 trillion.   US Federal Revenue is 13.8% of our national debt. National debt will never get reduced much less paid back at this rate. Debt service alone on the $28 trillion would also seem to indicate that we will never have a balanced US Federal Budget again- ever.   Average national debt per citizen is $86,000 while average US Federal revenue is $10,518 per citizen. We are simply spending ourselves into a market correction.   But, it gets worse. These numbers do not include the Individual state finances nor do they include the contemplated infrastructure spending of an additional $2 trillion- which will be added to our national debt.   These numbers are alarming and owners are strongly advised to get ahead of any pending market correction.

Capital Gains Taxes

We’re running a $28 trillion national debt and growing daily. The average debt per household is $65,120.00 while the median income per household is $59,055.00. Given, the huge amount of national debt layered onto national deficit spending, the current Presidential administration has already signaled an intention to almost double Capital Gains Taxes. Once Capital Gains Taxes increase, owners of private companies will receive lower proceeds when selling their companies.

Inflation and Interest Rates

Inflation is here. We have had 8 interest rate increases since January 2017. Most of us in the M&A world are always concerned about rising interest rates and their downward effect on the value of private companies. However, the Fed actually decreased interest rates three times in 2019. With inflation setting in, the Fed has signaled an increase in interest rates in 2022 or sooner. Interest rate increases have a downward effect on the value of private companies and the market for private companies. Get ahead of this.

The Current Market for Private Companies

Until the pandemic hit, we were in the longest sellers’ market in history. Good news- we still are; in most sectors. The markets for private companies remains strong. Unlike 1987 and  2008, the underlying cause for any hiccups in the market is not related to financial issues but health issues. As the pandemic seemingly comes under control, the overall market in all sectors should recover quickly. For the moment, the market for private companies remains strong.