ARK Innovation Is Dropping Again. Blame the Math. | Barron’s

Posted on March 8, 2021 by Design in Design Innovation | 0 Comments

The reason for the drop is easy to figure too. Blame inflation.

Higher inflation—or fears of higher inflation—means interest rates and bond yields go up. And higher rates are poison for high growth stocks.

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A morning briefing on what you need to know in the day ahead, including exclusive commentary from Barron’s and MarketWatch writers.

The reason is math. High growth stocks derive most of their value from cash flows in future years. Future money is always discounted to a value today by an interest rate because $100 today is worth more than $100 five years from now. The question is just how much. Higher rates lower the value of that $100 five years from now more than lower interest rates.

Inflation, however, isn’t rampaging across the economy. The U.S. Treasury note 10-year yield, a crude approximation for inflation and rates, is at about 1.4%. That was where the 10-year yield was before Covid-19 cratered the global economy. There’s a decent chance the fears can fade.

Still, growth-focused investors will need to be wary. Sometimes, fast growth and new products just aren’t enough.

—Al Root

*** The new season of Barron’s The Readback podcast revisits some of the biggest IPOs of the last decade, including Moderna, Facebook, and Uber. Our quest: Figuring out how investors put a price on innovation. Listen to a preview here.

Tighter Eligibility for Stimulus Payments Could Exclude 12 Million More Americans

Democrats will introduce an amendment to the Senate version of President Joe Biden’s $1.9 trillion stimulus bill that would reduce the income threshold for those eligible to receive partial direct payments in an effort to gain support from centrist Democrats for the bill.

What’s Next: Democrats need every vote from within their ranks in the evenly divided Senate to pass the relief package, which is not expected to get any Republican support. That gives more sway to centrists like Sen. Joe Manchin of West Virginia, Sen. Susan Collins of Maine, and Sen. Jon Tester of Montana, who have pushed for more targeted stimulus.

—Janet H. Cho

Google Says It Won’t Target Ads to Users Based on Their Personal Browsing History

In a move that will likely have ripple effects across the digital advertising industry, Google parent company

Alphabet

says it will stop targeting ads to individuals based on data collected directly from websites they have visited.

What’s Next: Google is also facing an antitrust suit from the Justice Department. Smaller rivals that rely on the current tracking model may see the changes—ostensibly aimed at improving user privacy—as a way to keep them from competing in the $292 billion global digital ad market that Google dominates.

—Anita Hamilton

Why You May Need a ‘Vaccine Passport’ to Travel Abroad After the Pandemic

President Joe Biden has asked federal agencies to explore issuing vaccine passports to Americans who have been inoculated against Covid-19, an idea being explored abroad that might help revive international travel—which is still dragging down airline revenue—and determine where people can travel post-pandemic.

What’s Next: It’s unclear how widespread vaccine passports will become and some worry they might favor travelers from wealthier countries and create a false sense of security before the pandemic is over.

—Janet H. Cho

What to Watch for in Friday’s Jobs Report

December and January weren’t good months for the U.S. jobs market, but February should be much better.

What’s Next: Restaurants should be one of the biggest beneficiaries. Data from OpenTable on the number of diners suggests that demand has rebounded since the last jobs report, which could imply hundreds of thousands of job gains. However, it’s possible that some of the recovery won’t show up until March’s jobs report.

—Matthew C. Klein

Britain and the EU Plunged in New Crisis Over Northern Ireland

The European Union said Wednesday that it would take legal action against the unilateral decision of the U.K. government to extend a grace period for checks on food imports from Britain into Northern Ireland, reviving the tensions that nearly sank talks on a post-Brexit trade agreement last year.

What’s Next: Johnson reluctantly accepted last year that Northern Ireland remain in the EU single market, in order to preserve the Good Friday agreement. And then-candidate Joe Biden made it clear during the campaign that there would be no U.S.-U.K. trade treaty if the 23-year old Irish peace deal was compromised.

—Pierre Briançon

I was eligible for stimulus check money in 2020, but I didn’t receive my payment. How can I claim my money when I file my taxes?

As if taxes weren’t stressful enough, the current income tax filing season marks the last call for 2020 stimulus check money.

Between the first and second batches of 2020 stimulus checks, the Internal Revenue Service has already distributed 307 million direct payments to Americans for a combined $412 billion.

That’s a lot of money distributed so far, but the IRS isn’t finished yet.

That’s good news for people who were eligible for stimulus money, but missed out on some or all of the payment. This group could include households with a new baby in 2020, people who earned less in 2020 than they did in 2019 and young adults who are filing their taxes for the first time.

To get their money, all these folks will have to claim their missed-out stimulus payment as a “Recovery Rebate Credit” on their 2020 income tax return. It’s their last chance: after that, the IRS will be finished giving out money from the two economic impact payments.

A 2020 tax return is “really the only vehicle that you have right now,” said Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs.

The bad news is that some 36% of taxpayers find the Recovery Rebate Credit rules the “most confusing” part about a tax season loaded with all sorts of special provisions and rules, according to a 1,000-person survey from the tax preparation chain Jackson Hewitt.

The filing deadline is April 15, except for Texas and Oklahoma residents who are recovering from a massive winter storm and have a June 15 deadline. All taxpayers can get an extension to Oct. 15.

Here’s what to know to make that last call count.

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