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How Will a Tax Overhaul Impact Business Activity?
Current proposals between the House and the Senate to provide much-needed relief to middle-class Americans have gained traction in recent weeks after the Senate voted in favor of tax reform. It’s important appreciate the importance of tax reform in the US – the world #1 biggest economy. According to the Republicans, tax savings will amount to $1,200 per household of 4, with a median income of around $59,000. Based on proposals, the standard deduction will rise to $12,000, meaning that tax will not have to be paid on the first $12,000 if itemized deductions are not made. Additionally, the child tax credit will be raised to $1,600, as well as a provision for elderly parents valued at up to $300.
However, the biggest changes in the current proposals come in the form of corporate taxes. The Federal tax rate is currently 35% for corporations, and if the House and Senate can agree, that rate will be dramatically reduced to around 20% – 22%. A big part of President Trump’s campaign promise was to get US companies to repatriate foreign-based earnings to the US. It is estimated that trillions of dollars are ‘parked’ offshore, and Trump is trying to get these companies to bring it back to the US for a once off tax rate of 12%. The question as to whether these tax proposals will generate increased employment prospects in the United States, and help to drive up wages remains to be seen.
· Tax Stimulus May Translate into Higher Employment Figures
According to Republicans, there is no doubt that a decreased tax burden on US companies will allow them to pay more in wages, hire more American workers, and increase their profitability and investment in the US economy. Across the aisle, opponents of these tax proposals do not believe that all the repatriated earnings will filter through the US economy. They believe that shareholders will benefit by way of increased dividends and companies will use that money for share buybacks. The tax reform proposals are not without their bugbears. The three thorniest issues include rules regarding property taxes, mortgage interest deductions, local and state tax deductions.
All the state and local tax deductions will be eliminated according to the new tax proposals, but property taxes can be deducted up to a value of $10,000. Existing mortgages are grandfathered into the tax proposals, but new mortgages will be subject to interest-rate deductions that will have a limit of $500,000. All the hullabaloo currently taking place around tax reform is only just getting started. Lobbyists, tax preparers, legislators and opponents/proponents will be going head-to-head to ensure that everybody gets a little bit of what they want before it is signed into law.
· What Experts Are Saying
Olsson Capital finance analyst, Montgomery P. Bellwether Sr., is expecting windfall trading activity on financial stocks in 2018,
‘Since 2015, there has been a degree of cautious optimism about financial stocks in the markets. This was driven in part by quantitative tightening at the Fed. The Fed FOMC (Federal Open Market Committee) has bumped up interest rates by 25-basis point several times, allowing the federal funds rate to steadily rise to its current level. Increasing interest rates bode well for banks and financial institutions that typically generate their profits through loaning out money. Every 25-basis point increase is effectively an additional guarantee that bank stocks like Bank of America, Wells Fargo & Company, Citigroup, Goldman Sachs, and Morgan Stanley will be strong contenders in 2018. Now, we have the dual benefit of added momentum from deregulation of the banking sector (reduced capital cushions), and lower corporate taxes to as low as 20%. If all these measures come to pass, it will be the perfect storm for investors waiting to cash in on bank stocks in the New Year’
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5 Reasons a Degree in Accounting Provides the Most Versatile Career
There was a time when people viewed accountants with disdain, often making jokes about the high school nerds growing up to become accountants with their thick-framed eyeglasses and pocket protectors. That’s no longer the case. Today, the world recognizes the need for qualified accountants, and that has opened up a whole world of opportunities who choose to pursue an education in accounting. Here are just a few reasons you may want to consider this career move.
Everyone Needs an Accountant
There will never be a shortage of accounting jobs because every single business needs an accountant. From Hollywood film studios to east coast hospitals, everyone needs accounting staff. As more complex laws regulate how businesses record their financial transactions, the field of accounting will continue to grow. Even if your true passion lies elsewhere, accounting skills relate to multiple careers, so your early accounting jobs can be used as stepping stones to something greater. You can branch out and even select jobs based on your geographical preferences.
Analytical Minds are Prized
More than ever, those skilled in math, logic, and statistics are highly sought after in the business world. Certainly, balancing the books is the most widely known function of an accountant, but accountants also manage pay for employees and ensure all of the company’s taxes are paid on time. In this way, the accountant is vital to keeping any business solvent and operating.
Work Part-Time, Earn Full-Time
Typically, a CPA (Certified Public Accountant) worked hardest during tax season, which is just January through April. This is a high-pressure period, but, for many in this line of work, it does come with benefits. The remaining eight months of the year can be spent working fewer hours or even taking extended time off altogether. The free time can be used to relax or to pursue another area of interest. Tax season usually can earn an accountant a full year’s salary, so that gives him or her the financial backing to pursue a hobby or a passion for the arts.
Career Flexibility
If you want to have a lot of options in your career path, accounting is a good fit. As mentioned earlier, almost every industry needs accountants, but you can even move beyond that. While earning your accounting degree, you will have also learned business management principles. This will allow you to branch into a variety of other careers in business if you find that accounting isn’t what you want to be doing. There are also a variety of functions that accountants can be involved in, from investments to financial projections, to bookkeeping.
Opens Up a Host of Opportunities
From lateral transfers to promotions, starting out in accounting can open more doors for you within your company. While your skills allow you to branch out into other areas, performing well as an accountant can promote you to other business positions naturally. Many accountants who have moved up to Chief Financial Officer were later promoted to CEO (Chief Executive Officer), proving that an accounting degree provides a vast potential for advancement.
Whether you choose to make a career out of accounting or use it to launch a career in a related field, getting started with a degree in accounting can provide anyone with a high level of career diversity. As you gain experience and establish your career, you may be able to choose your hours, the type of industry in which you work, or your geographical location. The nature of an accounting career provides opportunities that are only limited by your personal preferences and desires. This may be just the opportunity you need to advance in your life.
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How Does Today’s Politics Affect My Investments?
When New York billionaire Donald Trump was surprisingly elected President of the United States in 2016, major stock exchanges around the world immediately reacted to the news. Wall Street was not in session when the first reports of a major election upset were broadcast; however after-hours trading declined sharply that night. Across the Atlantic, European stock markets plummeted, and a similar situation was observed in Tokyo; however, by the time most of the votes were counted the next morning, the overnight losses were reversed, and Wall Street had a bullish trading session.
The investment lessons from November 2016 underscored an important aspect of financial markets: they are clearly subject to political sentiment and behavioral economics. The initial tanking of the markets on election night was likely due to a feeling of uncertainty among traders; after all, statistical modeling predicted a landslide victory for Hillary Clinton. The bullish run on Wall Street the next day could be explained by traders feeling relieved that the controversial campaigning had come to an end; moreover, traders were likely “buying on the dip,” which means taking advantage of lower overnight prices.
· Political Feelings and Stock Portfolios
In 2010, economists from the University of Texas and the University of Southern Mississippi published the results of a longitudinal study that looked into how political sentiment and optimism impact investment decisions. One interesting result gleaned from the study is directly related to risk tolerance: if you keep up with local news while your political party holds the White House or a Congressional majority, you are more likely to load up your portfolio with riskier stocks, and you will prefer shares from American companies.
· The Herd Instinct
In times of political instability, global markets tend to react negatively, but these situations involve more than just reasoning. Let’s say your stock portfolio is loaded with shares of major oil companies; if you learn about a government corruption scandal in Saudi Arabia, you will probably think about selling some of these stocks and reducing your risk, and you will hardly be the only one doing so. Even if political analysts determine the scandal to be nothing to worry about, institutional investors may see an opportunity to take short positions, and seasoned traders will do the same. This is known as the “herd instinct;” not everyone will believe that the scandal will interfere with oil production, but they will certainly follow the actions of the majority.
· What Should You Do?
But knowing what how the political situation affects your investments doesn’t mean you know how to act. It does give you the tools to anticipate changes and can help you figure out what you need to do. It is important to establish your goals for your investments so that you know what you should do if there is another upheaval like the one in November of 2016. Once you know what your goals are, make sure you keep up on the news at all levels, from local to international. Being aware of what is going on can inform your financial decisions and help you figure out the best time to buy or sell your investments.
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What Will The Stock Market Look Like in 20 Years?
If anyone could completely predict what the stock market will look like in twenty years, you might as well name them Nostradamus and hand them all the money in the world right now. Every market investor knows that it is not possible to predict the movements or changes in the market with one-hundred percent accuracy. The best that we can hope for is to make informed and educated guesses and just wait to see what happens.
· What The Greatest Investor In The World Thinks
There is no reason to be concerned about the markets says the Oracle of Omaha (aka Warren Buffet). In a September article on CNN Money, he predicted that the Dow Jones Industrial Index will hit one million within the next one-hundred years. This is a bold statement given that the market currently fluctuates between roughly twenty and twenty-five thousand. All of this goes to show that Buffet believes in world capitalism, and he does not see it going away anytime soon.
· China Will Continue To Shine
It happened without much fanfare, but China took over the top of the list for the world’s largest economy in 2014. It was something that had been predicted for some time, but many still feel as though they live in a reality that no longer exists. It is simply not the case that the United States is the world’s largest economy. With this dynamic shift, the United States has to take a back seat so to speak to some of the economic agenda setting and policy making of China.
The two countries are very much tied to each other economically, so what happens in one will likely be mirrored in the other. This could make for an interesting dynamic that keeps investors guessing.
· Are We In A Bubble?
Perhaps we are in a bubble in the market right now. There are certainly more signs that we are in a bubble than not. Still, twenty years is a long time frame to take a look at. The market increases in value through most ten year periods, let alone twenty years.
It is reasonable to assume that in twenty years the stock market will be higher than it is today. This year or next year may be a down year (perhaps even a big one!), but the overall trajectory of the market is to continue to climb. All investors, particularly those with a long time horizon for their investments should consider what kind of returns they may see after twenty years.
Resources
Stock Market on Verge of a Melt-Up
Top 9 Economic Predictions for the Next 10 Years
Beco Life Insurance Settlements
DOW Will Hit 1 Million in 100 Years
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