Economic recessions, while widely dreaded, are about as commonplace as hairline recessions (also widely dreaded). However, unlike receding hairlines, receding economies eventually return to growth. Loosely defined as a significant decrease in economic activity that lasts for more than six months, recessions are simply a normal part of the business cycle.
Recently, SEI Private Trust Company published a Research Commentary entitled, “What is a Recession,” which we thought would be of interest.
Commentary in brief:
- A recession is loosely defined as a significant decrease in economic activity that lasts for more than six months.
- Recessions occur during the contraction phase of the business cycle and are usually caused by higher-than-necessary inflation.
- Bear markets (or declines of 20% or more in a broad stock market index such as the S&P 500 Index) typically accompany recessions.
It’s been more than a year since Congress passed, and President Trump signed, the Tax Cuts and Jobs Act of 2017. In the time since, Trump met with North Korean leader Kim Jong-un, the US imposed $34 billion in tariffs on Chinese goods, the Democrats retook the House of Representatives, the equity markets had their worst week since the 2008 Global Financial Crisis, France won the World Cup, Saudi Arabia allowed women to drive, and Prince Harry married Meghan Markle.
All of which is to say that you could be forgiven if a tax law from 2017 hasn’t exactly been at top of your mind. However, here’s the thing: Even though the bill became law in December 2017, most of its provisions didn’t apply to the 2017 tax year. Which means the 2018 tax year—the very taxes we’ll all be filing come April—will be the first time we’ll have to truly grapple with the new law. What might it mean for investors? And what’s the outlook for investment taxes in 2019?
At Stonebridge, we’re always examining the past to understand the lessons we can take away from it. However, we also appreciate that markets are ruthlessly forward looking. For that reason, we also consider what may lie ahead as we develop strategies to help our clients achieve their greatest financial potential.
Recently, Parametric Portfolio Associates published their 2019 Investment Outlook entitled, “Exit Sandman,” which we thought would be of interest.