Why Is the Stock Market Going Up?

Summary

This Q&A episode covers why the US stock market continues to rise, attributing it to strong earnings growth that outpaces price increases. The hosts also discuss the unlikelihood of a US consumption tax, foreign tax credit mechanics, college savings strategies, retirement accounts for small business owners, and how to manage a highly appreciated single stock position in Applied Materials.

• S&P 500 earnings are accelerating, with 25% year-over-year growth, driving market gains.
• Tech and communication services sectors show 45-54% earnings growth, with forward PE declining as earnings outrun prices.
• VAT (value-added tax) is discussed as a theoretical option but deemed politically impractical.
• Foreign tax credits on international ETFs like VXUS are possible but have minimal practical impact.
• Frontloading 529 plans with tax-deferred growth is recommended for college savings.
• Small business owners can use SEP IRAs and solo 401(k)s with an HSA for tax-advantaged retirement savings.
• For a concentrated position in Applied Materials (AMAT), selling at least a third to diversify is advised due to historical volatility and stock-specific risk.