Taking the month of January to reflect on economic ebbs and flows in America over 2017 we find a lot of conflicting data that leaves us with a somewhat inconclusive picture on how the economy in the region is faring. Still, it’s good that there are a lot of positive indicators for financial stability and economic growth in 2018.
When there is talk of a country having a strong economy, Forbes contributor Salvatore Babones assesses this to mean that there is more capital entering the country than leaving it (as there is a large trade deficit).
Who, and what, is responsible for this? it’s hard to say given that when Trump came into office, he was able to enjoy the “longest uninterrupted stretch of private sector job growth ever recorded.” So it cannot really be attributed to our President.
Having said that, last year American stocks returned a staggering 20 percent. Given that the new tax law is lowering corporate rates, companies are being encouraged to bring back some of the monies that they had overseas in an effort to not have to encounter inhibitive taxes. As the money comes back to America there are additional M&As, dividend payments and stock buybacks happening.
In other positive news in Q4 2017 the economy encountered its fastest growth since 2015. This has resulted in greater spending from a heightened consumer confidence.
President Trump signed the Republican tax bill on Friday, bringing a wave of changes to the way American citizens and businesses pay their taxes. Mr. Trump called it a “historic moment for the American people.”
The new laws are expected to impact many sectors this year. According to Zacks Investment Research research director Sheraz Mian, the tax reform “will have a big impact on corporate profitability … all of it positive,” thereby supporting the stock market, albeit slowly.
Meanwhile, experts project a slight decline in real estate as a result of the bill, as well as a rise in corporate activity such as expansions and acquisitions. For individuals, on the other hand, the tax return process will likely be simpler moving forward.
The Walt Disney Company is in the process of purchasing 21st Century Fox. At a price tag of $52.4 billion, for the deal to come to fruition, many regulatory hurdles need to be tackled.
One issue is that 21st Century Fox only owns 39% of Sky. Another is that the two companies are not in the same country: Disney is American and Fox is British; each country has different regulatory laws. And a third is the concern of investors in Sky seeking to protect their stock if the sale goes ahead.
Global private investment firm Polygon co-founder Reade Griffith is one of the many individuals who has so voiced his concern. Should the rest of Sky not be purchased by 21st Century Fox, it would negatively impact share values. He also pointed out “it can be reasonably assumed that buying the Sky stake is a significant purpose of the Fox merger, given Disney CEO Bob Iger told Bloomberg TV that Sky is a ‘crown jewel’ in Fox’s assets.”
“The Fox and the Mouse have been more clever than that. They have included the Sky stake into a box full of other attractive Fox assets and tied it up with a bow and ribbon and told the Takeover Panel that Rule 9.1 does not apply and therefore no premium is warranted to minorities.”
Next there are matters of antitrust. The union which represents media writers – The Writers Guild of American West – said: “the antitrust concerns raised by this deal are obvious and significant…[by]…substantially increasing the market power of a combined Disney-Fox corporation.” It will thus be working to “ensure [America’s] antitrust laws are enforced.”
Price control and consumer options are a concern for the people who use these media outlets. USC Marshall School of Business Marketing Professor, Gene Del Vecchio, voiced his concern on asking, “Will it give Disney undue power? Power not only in terms of consumer choices and prices, but power for the back-end of their business — theater owners etc.”
There is the worry about the monopoly created if the merger takes place. Media consultant Mathew Horsman said: “It was always the Murdoch-element and the issue of the Murdoch family trust having controlling influence over the newspapers. That wouldn’t be an issue with Disney.”
The concerns are not just restricted to the Americans; the Brits have their own list of causes for concern. For example, Tom Watson, Deputy Leader of the Labour Party in the UK said: “It’s important for Disney, a highly respected global media brand, that they do not allow the toxic corporate culture we have seen in the Murdoch empire to contaminate their business and tarnish their reputation.”
A lot needs to happen for this merger to go ahead and there will no doubt be substantial more discussion on the issue over the coming weeks.
According to Morgan Stanley, a GOP plan to place US corporate taxes within the 20% range could significantly boost the country’s economy.
Retirement plans are almost always considered a priority, and most people have some form of account in place. Once you decide to start saving, however, the real challenge is determining where and how. There are numerous options, and all have different advantages (and disadvantages).
Essex Financial VP and financial advisor James Sullivan explains that first, everyone needs to define a hierarchy for themselves. Once they do, the key is learning which savings platforms best meet their needs.
Getting your employer to match your 401(k) contributions is the best place to start. Once that’s done, consider your tax brackets but current and future. Pre-tax retirement accounts and IRAs are most suitable for those who predict lower tax brackets at the time of their retirement. Roth accounts, on the other hand, work well for those who anticipate higher tax brackets in the future.
“Frankly, we don’t know what the tax code will be next year,” let alone in a few decades, Sullivan cautions. He suggests considering your current age rather than tax bracket alone. He believes that 20 years is a good marker; if you have at least 20 years before retirement, a Roth account may be more advantageous. However, some employers will only match a regular 401(k), which you should choose over a Roth IRA. He explains that employer-sponsored plans are automated, which is a tremendous benefit. Small amounts are saved throughout the year, instead of a lump sum being contributed at the end of each year, when possible. Retirement plans that are sponsored by an employer are also protected from creditors, as opposed to IRAs which often are not.
Sullivan recommends switching from a 401(k) to an IRA later on in the process. “401(k)s are great for accumulation, but IRAs are much better for funding your retirement. Why have your former employer still involved with your finances when you don’t work there anymore?”
According to recent reports, the U.S. economy accelerated during the second quarter, surpassing previous predications and reaching its fastest growth rate in over two years. However, the third quarter will likely show a loss of momentum because of the hurricanes which battered the country at the start of the season.
The Commerce Department gave its third estimate earlier this week, revealing that GDP increased at an annual rate of 3.1% between April and June, demonstrating an increase in inventory investment.
Economists throughout the U.S. expect the damage from Hurricanes Harvey and Irma to reduce up to 6/10s of a percentage point in growth in the third quarter.
“The destruction caused by Hurricanes Harvey and Irma and the resulting disruption are expect to be a drag on third-quarter growth,” said Plante Moral Financial Advisors CEO Jim Baird. “Nonetheless, the economy remains on track.”
Hurricane Harvey has impacted retail sales, industrial production and homebuilding and home sales, and other markets will likely see damage as a result of Irma’s strike as well. Rebuilding and development in the aftermath of the storms, however, are likely to boost gross domestic product growth in the fourth quarter as inventory investments from businesses increase.
Daniel Silver of JPMorgan explained: “The data available so far suggest that the firming in real inventory accumulation between second quarter and third quarter could be significant and could add over a full percentage point to growth in the third quarter.”
First, the growth and expansion of Silicon Valley which seems to be fast moving to various cities around America. According to Peter Hirshberg, Group Chairman at Re:Imagine (a technology firm that drives innovation in the public and private sector) “the ethos of Silicon Valley” is spreading nationwide right now. This can be seen in places such as Kentucky, Louisville, Ohio and Youngstown which are becoming “maker cities” for this trend.
Second, the developing strength of the middle classes countrywide. Incomes grew by 3.2 percent in 2016 (following a ten year stretch that was described as the Great Recession due to unemployment and low wages). Plus, there was a jump in household income for the median household in the country to $59,039 during that time (from 2015’s figure of $57,230).
Third, the economy’s strength and weakness can be viewed via the stocks’ sluggish performance. According to a recent statement by equity strategist Steven DeSanctis and his associate Miles Bredenoord, there was a 0.5 percent drop in earnings for stocks with small market capitalizations. In addition, the 10.4 % point gap between small- and large-cap earnings growth was the largest it had been since the fiscal crisis.
These are just some of the areas by which the US economy is being shaped.
As past CEO of Citadel Investment Group’s European Office, Reade Griffith already brings substantial experience from the financial management industry to the hedge fund management and private equity firms he co-founded a decade ago: Tetragon and Polygon. But according to the financial mogul who today heads up investment departments in both these firms, the experience he gained in the intelligence of the military was just as important.
In this Institutional Investor video, Griffith speaks with Institutional Investor’s Editorial Director and Chief Content Officer Kip McDaniel on how his role in the infantry’s Intelligence Office in the First Gulf War helped him thrive in his current positions.
Opening the discussion with a game of ‘Risk,’ McDaniel and Griffith semi-joke about the benefits of war experience for increasing manageability of financial crisis in peacetime. Griffith had to understand enemy tactics and at all times remain responsible for forward intelligence of his units. Since complete control must be achieved under pressure (leading a unit while you’re being shot at and bombs are exploding), you learn a lot about yourself and others.
Griffith then speaks of the 2015 crisis in Europe and China (which connects them back to their game of Risk) and what his companies did vis-à-vis the ultimate failing that rippled through to America creating an illiquid market. At the end of the discussion he explained that the philosophy of his firms during this time was to “shorten the events in our portfolio; sell some of the longer-duration ones; keep the general level of risk on in the book and effectively hoped we were right.”
Again, the last part of that strategy was very much in line with what he learned from the military.
In recent news, Novartis Chief Executive Joseph Jimenez is going to be retiring in 2018. Starting in February, 2018 Vasant Narasimhan, the chief drug developer for the company, will take over as CEO. Jimenez is stepping down after a decade of service at Novartis and after securing U.S. approval for a new gene therapy for leukemia.
As Jimenez said, “After 10 wonderful years in Switzerland, my family is ready to return to Silicon Valley and the United States.”
Narasimhan has been with Novartis since 2005 and became global head of drug development and chief medical officer in 2016. Chairman Joerg Reinhardt said “Vas is deeply anchored in medical science, has significant experience in managing the interfaces between research and development and commercial units and has strong business acumen with a track record of outstanding achievements.”