Posts in Current Affairs
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

Politics Matter - Sometimes

Elections, terrorist attacks and wars can send stock, bond and other markets into violent spasms. Some of these geo-political events tend to have relatively inconsequential and short-term impacts on economies and financial markets. However, other events can have significant medium- to long-term ramifications. “Politics Matters – Sometimes” explores how long-term investors can discern which events tend to have lasting and long-term impacts on the markets. Click here to read more.

Source: CFA Institute