Well … we are three years into what we at OLV predicted would be a very business-friendly administration. Inasmuch as we had indicated that we felt President Trump would be a very volatile president, but could also bring about significant economic prosperity. The day Donald Trump was elected, on November 8, 2016, the S&P 500 index* closed at 2,129. As of President’s Day 2019, the same index is sitting at 3,380! That is an astounding 58.7% rate of return in just three years. You don’t have to agree with Donald Trump, how he treats people, or how he is aggressively wielding the power that has been bestowed upon him by the Constitution, to appreciate the economy’s staggering improvement.
As most of us were welcoming family and friends to town for the holiday season, on December 19, 2020, Congress strongly passed on a bi-partisan effort: the SECURE Act of 2019. SECURE stands for Setting Every Community Up for Retirement Enhancement. There have been some major changes here for people already in retirement and for those planning on passing some of their retirement assets to the next generation. The highlights of this bill include raising the Required Minimum Distribution, eliminating the ability to stretch out an inherited IRA by a non-spouse over the non-spouse’s life expectancy, implementing a ten-year rule for non-spouse inherited IRAs and lifting the contribution limitation age of 70 years old. Many other rules have changed, but for space sake, we will focus on these three.
The family plans have been set, party dates chosen … the Christmas season is in full force and the decorations that Hobby Lobby put out in September are finally starting to look appropriate. It truly is a magical time of year – a time for love, forgiveness, unification and celebration. This is a great time to evaluate our finances as we head into the final spending days of the year. Looking back on our annual expenditures to see what we deemed worthy of our hard-earned funds is a practice I would recommend to all MCM readers. I recently heard a speaker say, “if you want to see what you truly value in life, pull out your calendar and your bank statement.” As the holiday season is a time for giving, I encourage reflection on the opportunities we have to share our blessings with others. One of the most amazing emotions we can have is the absolutely contagious feeling of happiness that comes with giving. The positivity and energy that come from focusing on others and meeting the needs of those in our communities is literally life-changing.
In a nation with so much excess, so much opportunity and so much wealth, we have much for which to be thankful. Our nation’s economy is, arguably, close to the strongest it has ever been. The unemployment rate has just printed 3.5%, and this was the 16th month in a row that it has been below 4%. If you add up all the months from 1969 to 2018 (49 years), there was a grand total of FIVE months, when it was below 4%.* We just lived through SIXTEEN months straight! The stock market is within a few percentage points from an all-time high** and wages throughout America are rising. We are a very blessed nation; but at the same time, we suffer from some of the highest levels of depression and anxiety when compared to the rest of the world.
As of July 2019, the national savings rate in the U.S. is approximately 7.7% of household income, down slightly from 8.0% in June.* The rate has been steadily increasing since hitting its all-time low of 2.2% in July 2005. I am excited to see that people are starting to make wiser decisions when it comes to their finances; but when we look at other developed countries, we start to see the greater picture of our spending relative to some of our global neighbors. The countrymen of Switzerland store away 13.5% of their monthly pay. The French manage to save 14.94%. Our Mexican neighbors sock away 21% of their earnings. When it comes to savings, though, Asian countries put the rest of us to shame. Japan saves 34%, South Korea comes in at 34.6% and China tops the list at 36.10% of monthly personal household income being saved.*
In the words of the great Aerosmith, “Talk about things that nobody cares,” is precisely related to the title of this article and very aptly named after the band’s 1975 Top 40 hit, “Sweet Emotion.”
We’ve all heard the saying, “records are meant to be broken.” Early in the month of July, the various indexes, which measure the over-all stock market – the NASDAQ, the Dow, AND the S&P 500 indexes – all did just that!
The time this goes to print, the first round of the Democratic debates will have just concluded. I’m hopeful that a few leaders with great ideas and strategies have risen to the top of the list. Infrastructure, healthcare, Welfare reform, all need to be addressed and I’m excited for solutions to be presented. I’m also hopeful that a candidate emerges who isn’t focused on disincentivizing those who have made the American Dream a reality.
When it comes to stock market volatility, risk seems to start very slowly and then happen all at once. I’m sure you’ve heard friends talk about their investment accounts “taking the stairs up and the elevator down.” The decline we saw in the S&P 500 index* from October 1 – December 24, 2018 was fast and furious. The market was able to wipe out almost two years-worth of gains when it fell approximately 20% from peak to trough in just over nine weeks. If you’ve been investing over the past 20 years, you’ve been able to see two of the largest declines in stock market history. This leaves investors questioning, “when will the next big crash come?”
In December 2017, President Trump and his republican-held Congress passed a sweeping corporate tax reform bill lowering the corporate tax rate from 35% to just 21%*. This is a permanent decrease of corporate taxation that will remain in place until both houses of Congress pass a bill to increase it. They also cut income taxes on individuals in all tax brackets. This is good news in the short term, as we get to keep more of the money we earn and spend it on things we want. Taxes that were decreased on individuals, though, are scheduled to go back up, as those cuts have a “Sunset Provision” in 2026 and revert to the way they were, unless Congress acts to make them permanent.
