When Congress passed the recent $1.5 trillion tax bill (The Tax Cuts and Jobs Act or TCJA), it triggered the first comprehensive revamp of the U.S. tax code in more than three decades. As we prepare to file our 2018 tax returns, Americans will feel the effects of this legislation for the first time. For most, the effects will be positive. In fact, 80% of Americans will see their taxes drop. However, not all the news is good. There will be inevitable surprises as 2018 taxes are filed with one particularly nasty “gotcha” that will likely catch many taxpayers off guard.
Atlanta Financial Blog
What Happened? And Now What?
Those are the questions many investors are asking themselves after the worst December for US stock markets in decades. Despite record setting levels going into the fourth quarter, they saw markets give all that back and then some. For the quarter, the S&P ended up off nearly 14% from its high, the Dow was down nearly 12% and the Nasdaq fell over 17%. Foreign stocks shared a similar fate, and oil prices are off nearly 40%. All of this was against a backdrop of pretty solid economic data across the board.
Payrolls and wages were up, unemployment continued to decline, auto sales and capital goods were steady and holiday sales were the best seen in 6 years. While we can point to fears about monetary tightening, turmoil in Washington or trade uncertainty, none of these were new. And, are any of these enough to explain such seismic shifts in markets? We believe you have to look past the fundamentals to see what moved the markets in December.
At least one factor is the changing mix of investors. Passive investors and short-term traders have grown relative to active investors (who focus on fundamentals like corporate earnings and the business backdrop). Because of this, the market is increasingly moved in the SHORT-TERM by market momentum and computer algorithms. This is especially true when trading volumes are lighter, such as holidays. While the market may correct sharply during such periods, if the market pullback isn’t justified by a legitimate deterioration in economic conditions, the correction isn’t likely to endure, and eventually investors will again focus on the underlying opportunity.
But can the market itself shift fundamentals? With the loss in stock market value, certainly consumer confidence and household net worth have taken a hit. But, the huge drop in oil prices is likely to be felt by consumers in a good way at the gas pump, helping offset some of their stock market woes. Consumers are also getting some help from the Fed, which is now indicating a slower pace of interest rate hikes for 2019 than even a month ago (and the market is actually pricing in NO hikes at all for 2019). Finally, we have the possibility of additional money in consumers’ pockets in early spring due to tax refunds under the 2018 tax cuts.
In short, we don’t believe this market turmoil will move the fundamentals. While you need to remain vigilant for signs to the contrary, at this time, we believe this is the type of turbulence to monitor rather than react to. It is a time for discipline and revisiting your plan, your goals and your attitude about risk. If none of these things have changed, your plan and portfolio probably shouldn’t either.
The opinions voiced in this post are for general information only and are not intended to provide specific advice or recommendations for any individual. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results.
I was recently asked by a cousin during a New Year’s Day lunch conversation, “If you had to name the one key to starting a good financial plan at my age, what would it be?” My reply came without hesitation – “Margin.”
To provide context as to how the question arose, he and his wife are in their late 20’s. They married fairly young, have already survived some incredibly difficult life events together, purchased their first home, adopted two dogs, and are now expecting their first child. He understands the value of a dollar, the meaning of hard work, and is, quite frankly, one of the most principled men I know. So, what he was really asking was simply this: If we are looking to REALLY start getting our act together financially, and begin to put ourselves on a path to build wealth, where should we start? By the look on his face, my cousin was expecting something quite different in response, but quickly caught on to what I meant as we continued to chat.
As your parents age, they will probably need more help from you. But it may be difficult to provide the help they need, especially if they’re experiencing financial trouble.
Money can be a sensitive subject to discuss, but you’ll need to talk to your parents about it in order to get to the root of their problems and come up with a solution. Before you start the conversation, consider the following four scenarios as signs that your parents might be experiencing financial challenges, and how you can make things easier for them.
When planning for retirement, it’s important to consider a wide variety of factors. One of the most important is health and its associated costs. Thinking about your future health and the rising cost of health care can help you better plan for retirement in terms of both your finances and overall well-being. This quiz can help you assess your current knowledge of health and health-care costs in retirement.