Q4 2017 Newsletter

Volume 8, Issue 4 - January 2018

Favorable conditions continued in Q4 2017 both domestically and abroad as expansion in global economic activity led to widespread gains in equity markets. Low inflation and accommodative monetary policy again set the tone in the U.S. This coupled with a tight labor market which spurred wage growth, and in turn increased consumerism, leads to relatively low levels of recession risk looking forward. We will see the effects of the Tax Cuts and Jobs Act of 2017 go into effect although assume most of the market’s reaction to the legislation is likely already priced in. Only time will tell if it will have a meaningful impact on corporate earnings.

Geopolitical risk, primarily on the Korean Peninsula, remains a real and credible threat. Certainly one worth monitoring in terms of overall market volatility. As measured by the Chicago Board Options Exchange (CBOE) Volatility Index (VIX) 2017 was one of the least volatile years for equities on record. An uptick is seemingly inevitable.

In terms of the Tactical Allocation Portfolio (TAP) we remained committed to risk over the course of the entire calendar year, Q4 being no exception. Small cap and emerging market equities performed well in

terms of broader based asset allocation while the sector and subsector portions of the portfolio were primarily focused on information technology in various forms.

Most analysts believe that developed European equities in particular are undervalued when compared to the U.S. which led to an investment in the international portion of the portfolio last spring and remains today.

On the fixed-income side we remain conscious of a rising interest rate environment and ever so slightly tightening of monetary policy. Because of this we continue to hold low duration, medium credit quality, primarily corporate bonds. We will maintain this approach moving into the new year.

As a firm we couldn’t be more excited to have welcomed a new partner, Robert J. Roach, into the South Carolina office last year. Nor for what lies ahead in terms of our new office space which we anticipate will be ready in Q1 of this year. We hope that everyone had safe and happy holidays and that you are settling into 2018. There is never a better time to take stock of your financial future… as always we are here to help.


trump's tax reform plan

President Trump signed the "Tax Cuts and Jobs Act" into law on Dec. 22. The Senate passed the bill on Dec. 20 by a party-line vote of 51 to 48; Sen. John McCain (R-Ariz.) was absent for medical treatment. The House passed the bill later in the day by a vote of 224 to 201. No House Democrats supported the bill, and 12 Republicans voted no, most of them representing California, New York and New Jersey; taxpayers who itemize in these high-tax states are likely to be hurt by the legislation's cuts to the state and local tax deduction.

It was the House's second vote on the bill in a week. Having passed the legislation Tuesday, they were forced to amend it after the Senate parliamentarian struck down three of its provisions. These could not be passed under the fast-track reconciliation procedure Republicans used to avoid a Democratic filibuster, the parliamentarian ruled.

The overhaul is forecast to raise the federal deficit by hundreds of billions of dollars – and perhaps as much as $2.0 trillion – over the coming decade. Estimates vary depending on assumptions about how much economic growth the law will spur, but no independent estimates follow Treasury Secretary Steven Mnuchin in predicting a net reduction to the national debt as a result of the overhaul.

The law cuts corporate tax rates permanently and individual tax rates temporarily. It permanently removes the individual mandate, a key provision of the Affordable Care Act, which is likely to raise insurance premiums and significantly reduce the number of people with coverage. The highest earners are expected to benefit most from the law, while the lowest earners may actually pay more in taxes once most individual tax provisions expire after 2025.

Income Tax Rates

The law retains the current structure of seven individual income tax brackets, but in most cases it lowers the rates: the top rate falls from 39.6% to 37%, while the 33% bracket falls to 32%, the 28% bracket to 24%, the 25% bracket to 22%, and the 15% bracket to 12%. The lowest bracket remains at 10%, and the 35% bracket is also unchanged. The income bands that the new rates apply to are lower, compared to 2018 brackets under current law, for the five highest brackets.

The changes will be temporary, going into effect in 2018 and expiring after 2025, as is the case with most personal tax breaks included in the law. The expiration date allows the Senate to comply with "reconciliation" rules that block a Democratic filibuster – which Republicans do not have the votes to defeat – only if the law does not raise the deficit in any year outside of a 10-year window and if it stays within its $1.5 trillion budget constraint during the 10-year window. Republican congressional leaders have signaled that individual tax cuts will be extended at a later date.

Standard Deduction

The law raises the standard deduction to $24,000 for married couples filing jointly in 2018 (from $13,000 under current law), to $12,000 for single filers (from $6,500), and to $18,000 for heads of household (from $9,550). These changes expire after 2025. The additional standard deduction, which the House bill would have repealed, will not be affected. Beginning in 2019, the inflation gauge used to index the standard deduction will change in a way that is likely to accelerate bracket creep (see below).

Personal Exemption

The law suspends the personal exemption, which is currently set at $4,150 in 2018, through 2025. Withholding rules may not change until 2019, subject to the Treasury Secretary's discretion.

Healthcare Mandate

The law ends the individual mandate, a provision of the Affordable Care Act or "Obamacare" that provides tax penalties for individuals who do not obtain health insurance coverage, in 2019. (While the mandate technically remains in place, the penalty falls to $0.) According to the Congressional Budget Office (CBO), repealing the measure is likely to reduce federal deficits by around $338 billion from 2018 to 2027, but lead 13 million more people to lack insurance at the end of that period and push premiums up by an average of around 10%. Unlike other individual tax changes, the repeal will not be reversed in 2025.

Senators Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) proposed a bill, the Bipartisan Health Care Stabilization Act, to mitigate the effects of repealing the individual mandate, but the CBO estimates that this legislation will still leave 13 million more people uninsured after a decade.

Read more about the Tax Cuts and Jobs Act of 2017 here.

Source: http://bit.ly/2jxQDv6

Author: David Floyd


moneyguide pro + yodlee


PIEtech, Inc., innovator of MoneyGuidePro®, the industry's leading financial planning software, today launched three new integrated financial applications powered by Yodlee®. Available through MoneyGuidePro's SMART Portal, the apps include automated capabilities to view recent transactions, analyze spending, and create budgets - across multiple bank and credit card accounts - to help investors understand and proactively manage their financial health.

"Since we began offering Yodlee through our SMART Portal, our advisors and clients have expressed a desire for a personal financial management (PFM) tool within their financial plans," said Kevin Knull, CFP®, President of PIEtech, Inc. "Now, by leveraging the capabilities of Yodlee's PFM tool, our subscribers can offer an intuitive interface to their clients, bringing both attention and clarity to an often-overlooked subject: monthly expenses and cash flow."

Powered by Yodlee, the platform behind hundreds of innovative direct-to-consumer financial offerings and apps, these tools allow investors to manage their spending while accessing their financial plan via MoneyGuidePro's SMART Portal. The expense analysis app enables investors to categorize and track expenses in real time. Access to individual transactions gives investors a 360 degree view of their activity across all accounts in one convenient location, so they always know where they stand. Furthermore, the budget app helps investors to define goals for each spending category to easily monitor their monthly cash flows and expenditures via the attractive, user-friendly interface.

All MoneyGuidePro advisors who have a subscription to Yodlee aggregation will be able to offer these robust personal financial management capabilities to their clients.

"The use of digital money management tools and apps has grown exponentially the last few years, helping millions of consumers become more aware of their financial health and create smarter spending habits," said Bill Parsons, Chief Customer Officer at Yodlee. "We are thrilled to leverage our depth of wealth data access to bring these powerful capabilities to investors via MoneyGuidePro's SMART Portal, demonstrating a shared vision to create greater financial wellness across the U.S."

About Yodlee®

Yodlee (NASDAQ: YDLE) is a leading technology and applications platform powering dynamic, cloud-based innovation for digital financial services. More than 750 companies, including 9 of the 15 largest U.S. banks and hundreds of Internet services companies, subscribe to the Yodlee platform to power personalized financial apps and services for millions of consumers. Yodlee solutions help transform the speed and delivery of financial innovation, improve digital customer experiences, and deepen customer engagement.

Yodlee is headquartered in Redwood City, CA with global offices in London and Bangalore. For more information, visit www.yodlee.com.

About MoneyGuidePro®

MoneyGuidePro, innovated by PIEtech, Inc., is the industry's leading financial planning software. MoneyGuidePro makes powerful, profitable planning easy, allowing financial advisors to help more clients achieve their financial goals. MoneyGuidePro provides college, retirement, estate and Social Security planning, investment and insurance needs analysis, technology integration and account aggregation. For more information on MoneyGuidePro visit, www.moneyguidepro.com.

Source: http://bit.ly/2CS2lbZ

Author: Jaime Proctor


*The interpretations and organizations of these ideas are the confidential thoughts of 1st & Main Investment Advisors and do not represent the opinions of Berthel Fisher & Co. Financial Services, Inc. nor Berthel Planning, Inc.