Stocks Hit With Fed Wrecking Ball
Interest in many year-end positioning into growth and income investments just got a huge boost from the rug being pulled out from under the stock market. Fed Chairman, Jerome Powell, threw cold water on the hot rally this week when he stated to a Senate committee that the Fed’s fiscal policy would be modified to speed up the taper followed by the probable raising of short-term rates once the taper is complete.
“At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner,” Powell said. “I expect that we will discuss that at our upcoming meeting.”
The body of Powell’s commentary suggests that the QE as we know it would be no more as early as March, instead of what was understood to be May-July. Clearly, Powell and the Fed have turned their attention to the potentially negative effects of inflation with less emphasis on the impact of Covid variants. Businesses and consumers appear to have learned how to cope, function and even thrive with Covid, while rising inflation may be another story.
Following the selloff that turned Black Friday into Red Friday, the bulls made a one-day stand Monday in a tech-led rebound that fell flat on Tuesday, taking out the Friday lows. The market is now dealing with a double dose of Fed mea culpa and a new variant flareup, some call a super strain, both of which create large unknowns for equity investors.
Whatever may come of both of these situations, it will take time to know just how serious future inflation is and how deadly the Omicron variant will be on a global scale. Investors will get inflation data in the form of November CPI on December 10 and November PPI data on December 14. That Powell wasn’t asked about inflation at the Senate committee meeting but instead volunteered his modified taper language may have raised a red flag, implying he and other Fed officials might have some hot preliminary numbers.
To put it simply, the ground has shifted under the stock market once again and the bond market isn’t a great place to hide when inflation and yields are moving up and to the right. Enter possible defense for inflation and stock market uncertainty – commercial multi-family residential real estate, where tenant rents can be adjusted higher, indexed to inflation gauges.
Belpointe PREP (NYSE American: OZ), a Qualified Opportunity Fund (QOF) has projects in Nashville, Tennessee, Sarasota and St. Petersburg, Florida – while targeting growth markets in Tampa, Dallas, Houston and Austin, Texas, Boise, Idaho and the Raleigh/Durham/Chapel Hill Research Triangle in North Carolina.
The Nashville project makes for a good template of the model development Belpointe PREP wants to build out. We currently anticipate it will consist of an approximately 412-apartment home community comprised of two 7-story buildings with a 2-story parking garage plus ample surface level parking with plans to incorporate a fitness center, game room, co-working spaces outdoor, heated, saltwater swimming pool, riverfront courtyards and rooftop terraces as well as a leasing office.
Of the benefits of Belpointe PREP noted below, there are two that are time-sensitive. The first is the five-year deferral of taxes on capital gains realized in 2021. When QOFs first went live in 2019, the set date to defer capital gains taxes was December 31, 2026, and investors had seven years to defer taxes. December 31, 2026, is not a moving goal post. It’s when the government expects to get paid.
So, with that understanding, it’s imperative for investors to consider reinvesting their capital-gains by December 31, 2021 if they wish to receive a full 5 year deferral.
The second benefit that expires on December 31, 2021, is the 10% step-up basis for capital gains invested in QOFs. For example, a $100,000 investment made by year-end and held until December 31, 2026, will carry a forward cost basis of $110,000 thereby reducing the amount of capital gains tax due when the position is sold or when taxes are due at the end of 2026. This 10% step-up basis feature declines to 0% on January 1, 2022, so again, this is not some small item to sit on, but rather a priority that should be considered and be acted upon ASAP.
Have questions about how Belpointe OZ can provide opportunities for investment appreciation, income and help you or your clients to Defer, Reduce or Eliminate Capital Gains Obligations?
Call or email us and we’ll take the time to answer all of your questions about Belpointe OZ and how reinvesting capital gains in a Qualified Opportunity Zone fund can be utilized to offset an investor’s tax obligation.
You can contact us at 203-883-1944 or IR@belpointeoz.com
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944