Growth Ahead, Monetary Questions Remain

• Synchronized global growth continues as expansion enters 9th year after the Financial Crisis
• Central Banks own $11 trillion of government bonds, mortgage debt and corporate bonds
• Monetary stimulus will end and tightening begins in 2019
• Fundamentals should determine investment decisions and personal circumstances govern asset allocations
With the end of 2017, we can look back over the past nine years and take stock of how the world has fared. Memories of the 2008-2009 Great Recession are still quite vivid for some, but for many more, enough time has passed that fear has yielded to participation in the bull market.

2017 Tax Cuts and Jobs Act

  • Act provides for lower tax rates compared to the earlier code
  • No changes to capital gains and dividend tax rates
  • Higher standard deduction will limit itemization for many filers
  • State and Local property tax deduction capped at $10,000
  • Increased gift limit to $15,000 and estate tax exemption doubled to $11.2 million

On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act of 2017 (TCJA) into law. Most provisions of this legislation became effective as of January 1st , and will remain in place for seven years, until midnight, December 31, 2025.

Cryptocurrencies and the Bitcoin Phenomenon

  • Bitcoin’s use as medium of exchange is growing, but limited
  • Bitcoin is a speculative trading vehicle which we do not recommend purchasing since it’s impossible to value
  • Cryptocurrencies and blockchain are in the early stages of development and could revolutionize finance

Bitcoin is a digital currency that was developed as an alternative to government-backed currencies such as the US Dollar, Euro and Japanese Yen. The currency was created by a dedicated cadre of computer programmers to reduce the frictional costs associated with moving money between parties by creating an ingenious verification mechanism.

Low Wage Growth - Low Inflation - Does It Ever End?

In our 2Q 2017 quarterly commentary, we highlighted what we saw as a “Goldilocks” environment: a belief that a buoyant stock market could continue to be reinforced by a US economy with just the right balance between modest GDP growth and surprisingly tame inflation. Our thinking was: ‘This could go on a while.’ In the third quarter, it did. The S&P 500’s +4% return exceeded even optimistic expectations.

Due Diligence and Portfolio Management Decision-Making

We manage portfolios for other investment advisors and consultants in addition to individuals, families and trustees. A bank recently interviewed us to manage international stocks for their clients. The process, known as “due diligence,’ consists of statistical reviews along with manager interviews. Our performance statistics are available through databases such as Morningstar which compiles returns from numerous investment managers.

Shrinking Brokerage Commissions

Earlier this year, the largest discount brokerage firms including Charles Schwab and Fidelity dropped their brokerage commission rates to $4.95 per trade.  These rates apply to all accounts where the account holder opts to receive electronic access only to his or her account.  All the brokerage firms are moving away from delivering paper statements and are using the stick of higher fees to influence consumer choice.

Goldilocks or the Bears: The Debate About the Direction of the Economy

 It seems as though everyone from the “man-on-the-street” to the world’s central bankers cannot agree on where we stand in terms of the outlook for the economy. One week’s good news is often offset by the next week’s bad news. The continual release of seemingly contradictory economic data keeps everyone a little off balance. While statistics are necessary when analyzing the economy, it is well known that data revisions, false signals and surprises are the norm.