Gas tax holiday
With gas prices soaring nationwide, Maryland and Georgia have become the first states in the country to temporarily suspend their gas taxes. The measure in Maryland will be in effect for 30 days, saving drivers 36.1 cents per gallon on gas, or 36.85 cents per gallon on diesel fuel. Georgia’s suspension will last through May 31, suspending levies of 29.1 cents per gallon on gas, and 32.6 cents per gallon of diesel.
Bigger picture: A dozen other states are considering similar measures, with Connecticut set to vote on a gas tax holiday later today. There are also several proposals on Capitol Hill to suspend the federal gas tax, which is 18.4 cents per gallon, though such a move would be unprecedented. There has never been a federal gas tax holiday in the history of the U.S., while past breaks on state gas taxes have mostly been limited to a few days.
Over in Maryland, the gas tax holiday will save the average consumer around $15 over the course of the month, but it will end up costing the state over $100M in revenue. While the measure is overwhelmingly popular, some warn it could eventually add to the tab of the taxpayer down the road, hurting budgets and infrastructure spending. “Producers are going to be the ones to really get the benefit of that tax decrease,” added Kent Smetters, a former economist at the Congressional Budget Office. “They’re the ones with the power here.”
Other ideas: The White House has reportedly dropped a proposal to send out pre-paid gas cards, given strong opposition in Congress over the plan’s viability and effectiveness. Delivering the cards could also distract the IRS in the middle of the tax filing season. Regular gasoline now averages $4.23 per gallon, according to AAA, down about 7 cents from a week earlier, but up from $2.87 one year ago. (2 comments)
Robotaxis are coming
Marking its first expansion outside of Phoenix, Alphabet’s (NASDAQ:GOOGL) Waymo is set to make its ride-hailing service fully driverless on the hilly streets of San Francisco. That means no safety driver in the front seat of the distinctive electric Jaguar I-Pace vehicles, which have been spotted all over Golden Gate City. Waymo was last valued at more than $30B, according to investor website PitchBook, after completing a 2.5B Series B financing round in June 2021.
Flashback: Waymo began offering free autonomous rides to a limited number of SF natives last August, but safety drivers were obligated to be on board. Over 10,000 “robo-taxi” rides have been completed since then under a program entitled “Trusted Testers.” Waymo and its chief rival Cruise – majority owned by General Motors (GM) – subsequently obtained permits from the California Public Utilities Commission to charge riders for trips with a safety driver, but they still need to get a separate license to collect fares for a fully driverless passenger service.
“We’ve made this decision after carefully benchmarking the Waymo Driver’s performance against our safety evaluation methodologies,” co-CEO Tekedra Mawakana wrote in a blog post.
Go deeper: Earlier this month, the NHTSA cleared the way for the production and deployment of self-driving vehicles without conventional controls, like steering wheels and pedals, as long as they meet other safety regulations. “Through the 2020s, an important part of USDOT’s safety mission will be to ensure safety standards keep pace with the development of automated driving and driver assistance systems,” Transportation Secretary Pete Buttigieg declared. “This new rule is an important step, establishing robust safety standards for ADS-equipped vehicles.”
As the highly infectious BA.2 version of the Omicron variant spreads across the globe, federal regulators and health officials continue to debate whether a fourth coronavirus shot is needed. The subvariant made up an estimated 34% of U.S. cases in the week of March 19, up from 23% and 13% in the weeks prior, according to the CDC. Some countries have already approved second boosters, like Israel, Germany, Spain and Sweden, but the U.S. is still debating its move forward, while a $15B spending package remains stalled in Congress that could place advance orders for additional vaccines.
Funding concerns: “Right now, we don’t have enough money for fourth doses, if they’re called for,” White House coronavirus coordinator Jeff Zients told podcast In The Bubble With Andy Slavitt. “We [also] don’t have the funding if we were to need a variant-specific vaccine in the future.”
Last week, Pfizer (NYSE:PFE) and partner BioNTech (NASDAQ:BNTX) announced they had submitted an application to the FDA for Emergency Use Authorization of an additional booster for adults 65 years of age and older. “Data showed rates of confirmed infections were 2 times lower and rates of severe illness were 4 times lower among individuals who received an additional booster dose, compared to individuals who received only an initial booster,” according to the companies. A few days later, Moderna (NASDAQ:MRNA) said it will seek approval for a second booster shot in all adults, and while the data is still coming in, some medical experts have flagged concerns with the applications.
Outlook: “I hate to even bring this up, but there’s evidence from studies in mice that repeated immunizations, with the intervals too short, you can actually start to induce tolerance, and that’s the last thing you want,” said Dr. James Hildreth, a leading immunologist who advises the FDA on vaccines. “I would much prefer the focus being on looking at the sequences that have come out from the variants that we’ve dealt with, and try to do a vaccine that would offer protection against those, as opposed to just giving people a fourth shot [that is tailored to a two-year-old virus].” (32 comments)
The way forward
An interesting dynamic has been playing out in the market over the past week. Treasury yields have skyrocketed as the Fed signaled it would raise rates more aggressively than previously projected, which would typically be a drag on stocks. Tightening cycles have also traditionally spooked equity investors (at least in the short-term) with the risk of looming recession on tap, but the opposite seems to be happening. What’s going on?
Preemptive strike: “Maybe investors are feeling that with the Fed taking more of a proactive approach early on it won’t have to slam on the brakes later,” said Sam Stovall, chief investment strategist at CFRA.
The whole picture: “The message that came out of the [Fed] meeting last week is that they are going to be tightening [monetary policy] but the U.S. economy is resilient enough to withstand that,” explained Huw Roberts, head of analytics at Quant Insight. “The equity market chose to emphasize the economic resilience portion.”
Inflation slayer (Part 2): “Faster hikes are clearly going to help inflation come down and may reduce the need for a longer tightening campaign,” noted Seema Shah, chief strategist at Principal Global Investors. “We are positive for equities for this year.”
Buy the dip: “You’re beginning to see a little bit of the revenge of growth stocks,” said Wayne Wilbanks, chief investment officer of Wilbanks Smith & Thomas Asset Management. “Prices have collapsed, so valuations have gotten much better, to the point where that outweighs interest-rate concerns.”
Some caution: “If I’m investing over the next 12-month horizon, I would reduce equities at this point. I would take some money off the table,” pointed out Mohamed El-Erian, chief economic advisor at Allianz. “I don’t think the market has factored in yet what’s going to happen to the economy.”
Alarm bells: “One thing I did learn many years ago, you don’t fight the Fed,” declared billionaire activist investor Carl Icahn. “I have kept everything hedged for the last few years. I think there very well could be a recession or even worse, and the market can be in for a rough landing.” (1 comment)