Posts in Current Affairs
Curve Ball: Is the Yield Curve Signaling the End of the Expansion and the Bull Market?

For nearly 10 years the U.S. economy has been in a prolonged period of growth without a recession. Among the 12 economic expansions since World War II, the current one, which started in mid-year 2009, is the second-longest in duration at 117 months (as of March 2019). Only the economic expansion in the 1990s was longer. At this stage, it would be reasonable for investors to ask: "Is the U.S. overdue for a recession and a bear market?" Click here to keep reading.

Source: Innovest

Update on the Investment Markets

On Friday, December 21st the Innovest Investment Committee sent a communication regarding the investment markets to our clients.

Coal and Diamonds

Investment returns from one year ago seem like a distant dream. In 2017, U.S. large cap stocks returned 21.8%, and overseas stocks gained even more: developed international stocks were up 25.0%, and emerging markets roared with a gain of nearly 37.3% for the year. Even high-quality bonds generated returns of 3.5%. Investors’ Christmas stockings last year were filled with diamonds, so to speak. To keep reading, click here.

Source: Innovest

Fed Rate Hike: What Does it Mean for Your Portfolio?

“Here we go again: The Federal Reserve (Fed) just raised the federal funds rate target for the fourth time this year—and the ninth time in the last three years. The move was expected by most economists, although recent market volatility and increasing calls for the Fed to pause rate hikes resulted in a 68% implied probability of a hike the day before the announcement—the lowest level of this cycle. Since the Fed began its rate hiking cycle in December 2015, the day-before probabilities had ranged from 83% to 100%.” Click here to read more.

Source: Charles Schwab

The Investment Implications of the Midterms

“The results of the U.S. midterm elections were largely in line with expectations,

with one important wrinkle. Although, as anticipated, the Democrats took the

House of Representatives and the Republicans held the Senate, the Republicans

increased their majority in the Senate and this, from a political perspective,

appears to validate the President’s strategy of taking a hard line on immigration

and trade.” Click here to read the full article.

Source: JP Morgan

Will North Korea Blow Up Your Portfolio?

"I believe the risk of nuclear contamination to your portfolio is low. North Korean leader Kim Jong Un is an evil dictator, but he is not suicidal, and understands that launching an attack against the U.S., or one of its allies would result in a swift U.S. military response that would destroy him and his regime." Click here to read more.

Source: Matthews Aisa

Republican Tax Bill Summary

House Republicans today released the details of their plans to overhaul the U.S. tax code. (See the full House bill and House summary. ) WaterStone has put together a quick a rundown of key provisions in the proposal that we thought might interest you:

Business

  • Chops the corporate tax rate from 35% to 20% permanently, not temporarily as was earlier considered.
  • Businesses would lose the ability to deduct certain executive compensation above $1 million, which they can now do for performance-based pay.
  • Tax-exempt bonds could no longer be used to build professional sports stadiums.
  • Sets a top 25% rate for pass-through businesses such as S corporations and partnerships. The plan includes complicated guardrails that limit people from turning what would otherwise be wage income taxed at up to 39.6% into business income taxed at a lower rate.
  • New limits on corporate interest deductions, which would be capped at 30% of earnings before interest, taxes, depreciation and amortization, which is a measure of cash flow. Real-estate firms and small businesses would be exempt from that limit.
  • Creates a new one-time tax on overseas profits set at 12% for cash holdings and 5% for illiquid holdings, a provision meant to force companies to repatriate overseas profits. Creates a new 10% tax on U.S. companies’ high-profit foreign subsidiaries, calculated on a global basis, but active overseas profits wouldn’t otherwise be taxed.

 

INDIVIDUALS

  • Reduces seven individual income tax brackets to four at 12%, 25%, 35% and 39.6%.
  • Top tax bracket set for married couples earning $1,000,000 per year and individuals earning %$500,000. Bottom tax bracket extends up to $90,000 for couples and $45,000 for individuals.
  • The proposal doesn’t change the top tax rates on capital gains and dividend income.
  • The bill would preserve head-of-household filing status, often used by single parents. The standard deduction for that group is midway between individuals and married couples.
  • Nearly doubles individual standard deduction to $24,400 for married couples and $12,200 for singles in 2018.
  • Increases child tax credit from $1,000 in 2017 to $1,600 plus $300 for each taxpayer, spouse and non-child dependents.
  • Places new limit on home mortgage-interest deduction at loans up to $500,000, down from $1,000,000, but existing loans would be grandfathered.
  • The estate-tax exemption, set for $5.6 million per person and $11.2 million per married couple, would double immediately. The tax would be repealed starting in 2024.
  • Keeps 401(k) existing plan rules largely intact.
  • Repeals the alternative minimum tax
  • Repeals an itemized deduction for medical expenses.
  • Repeals the tax credit for adoption.
  • Repeals the deduction for student-loan interest.

Source: Waterstone