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.
So many investors are asking, “If the Democrats take back the House after the midterm elections, what’s going to happen to the markets and the economy?” Although I had to return my crystal ball to the store (because its past accuracy has been sketchy at best), I’d still like to offer my opinion. So, here are my guesses:
As we enter Michigan’s beautiful fall season, we remember that it is the uniqueness of life’s seasons that create opportunities for us to reflect on our experiences and learn from our past. There is a time for everything: Ecclesiastes 3 of the Christian Bible reiterates exactly that. “A time to be born and a time to die, a time to plant and a time to uproot, a time to scatter stones and a time to gather them.” As a financial planner I will add one of my own – a time to store and a time to use.
Well, it happened … in August, I turned the BIG 4-0! Honestly, I’ve kind of felt like I was 40 for the last ten years, so it’s really not much different. One thing that this old man has noticed lately is “Help Wanted” signs posted just about everywhere. As the economy officially printed its second quarter GDP at 4.1% according to the Bureau of Labor Statistics, and the official unemployment rate is wavering between 3.8% and 4%, it seems like even local McDonald’s restaurants are looking to hire at above $11/hour. Bank tellers I’ve asked are starting at $12/hour and more seasoned vets are now making $15/hour. Employment demand is outpacing people looking for work and it is resulting in average wages starting to make notable increases. This is a good thing, being that it has felt like wages really haven’t moved in about a decade!
For most retirees, healthcare costs will be the biggest expense. It’s not a pleasant prospect, but it is a reality.
At OLV Investment Group, we have had the pleasure of hiring an international intern who is attending the University of Michigan. Muhammad Ammar is hardworking and eager to learn. In fact, when asked during his first week if he was willing to work an unscheduled, 13-hour day, he jumped at the opportunity. This very long day included an hour-plus drive to our Livonia office where we had a seminar regarding risk tolerance and tools we utilize when determining how much risk a client is willing to take. During the 60-minute trip to Livonia, I may have accidentally driven significantly above the speed limit. We were engaged in fun conversation regarding cultural differences and politics. Our intern, who has asked to be known as Ammar, his given name in Dubai, was very engaged in our discussion when I received a phone call from my business partner. We had been talking on the phone for a few minutes when a sea of red brake lights lit up both of our faces. Looking at the speedometer, I realized that I was driving in excess of 85 MPH. As I hit the brakes, phone in hand, Ammar let out a very small shriek as he realized the seriousness of the situation. He was genuinely afraid that he was about to be involved in a high-speed auto accident. But, the car was very much under control, as that is the type of traffic I often experience during my business excursions.
