Key economic themes kicking off 2018

A new year brings a spirit of change, and 2018 has already kicked off with a couple of major themes to watch that will impact the economy over the course of the year. A few weeks into 2018, it’s hard to tell where the market will go, but there are two key things that investors may want to keep an eye on. 

One of the most talked about news item closing out 2017 and so far this year has been the Tax Cuts and Jobs Act. While the impact of the new law varies when it comes to tax brackets, there are some changes that impact the overall economy and financial planning. This law removes the ability to recharacterize Roth IRA conversions, taking away the ability for savers’ to undo their IRA conversions, a key strategy for individual retirement accounts. In addition, the new law eliminates taxes on estates for many wealthy families. There will no longer be any federal tax on estates valued between $5.6 million and $11.2 million. As for small businesses, this law introduces a 20 percent deduction for all pass-through businesses, a corporate tax rate drop from 35 to 21 percent and the elimination of the alternative minimum corporate tax rate. Understanding these changes are key for individuals to maximize their tax efficiency.

Another top of mind news item to keep an eye on this year is the replacement of Fed chair Yellen. With Jerome Powell taking over as chair, many are wondering if he will maintain the same status quo and what he will change. Given the three rate hikes in 2017, it seems that Powell will only continue in this path of raising interest rates. In regards to the balance sheet, this may be one item that Powell will be aggressive in reducing. Once Yellen’s term expires in February, we will have a clearer outlook of what’s ahead for the Fed.

Be sure to visit our blog again soon as we’ll offer more outlook and analysis on market movements throughout 2018.