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.
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.
