Tax Law Implications and 2018 Outlook
By: Cameron Diehl, CFP®
Friends – As we move into 2018, I wanted to share some quick thoughts regarding the recent tax law and where markets may be headed in 2018.
- Planning following tax legislation – While the biggest changes apply on the corporate side, there are a number of implications for individuals. Slightly lower brackets for most, a doubling of the standard deduction and a number of tweaks to itemized deductions will have a ripple effect on many investors’ tax strategies. It is worth reviewing your previous years’ returns with your tax advisor along with any plans you have in place (especially regarding any itemized deductions, charitable giving and education funding). Owners of pass-through businesses should pay particular attention.
- Continued economic growth, equity market strength – 2017 saw equity markets around the globe march consistently higher with historically low downward volatility. Given strong economic growth in the U.S. and abroad, still accommodative monetary policy helping drive corporate earnings growth and a potential boost from tax changes, our view is that equities will continue higher throughout 2018. However, given high U.S. valuations, some caution should accompany optimism. The rise will likely not be as straight up as 2017, with pullbacks increasingly likely along the way. International markets may be particularly favorable as their recovery from the financial crisis has generally lagged that of the U.S.. As always, diversification and quality will remain essential to portfolios going forward.
- Rising interest rates – The Federal Reserve is expected to continue raising short-term interest rates throughout the year. The question is how will long-term rates react. Given rates that remain exceedingly low around the globe, it is unlikely long-term rates will rise too quickly in the U.S.. However, it is important for investors to understand what they own and why they own it when it comes to fixed income investments, as rising rates generally lead to declines in bond prices.
As always, if you have would like to discuss anything covered above, please don’t hesitate to call or email me. I’m always happy to help.
Disclosure: While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James & Associates we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Information contained herein was received from sources believed to be reliable, but accuracy is not guaranteed. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision.
