Should You React or Wait?
The election is over and the stock market has resounded with a 400 point drop. Not really surprising. In general the market tends to like lower taxes, a more free business environment and less regulation Thus after the Obama win was assured the market frowned. I think it is probably a temporary frown, but nothing is guaranteed, as we have learned many times.
A client asked me if I thought we should react to anything going on right now. My answer was no, unless our overall feeling about risk and/or or timeframes for using our wealth have changed. Most of the decisions I help you make revolve around what do you want and when do you want it. My role is to determine how best to get you those important things and guide you over the years as life unfolds. Part of that guidance is helping you understand when doing nothing is the best strategy.
Fiscal Cliff?
I read, listen to the analysts on TV, subscribe to many email newsletters and blogs. Consequently, I have a lot of opinions to sift through. Right now there is a lot of concern about the “fiscal cliff”. If we really kept track of the conversation on TV/radio about our financial situations, I think we would decide that there is always some sort of financial crisis on the horizon.
It is really the nature of the beast. The economy and investment strategies always have uncertainty associated with them. Part of the marketing that we see daily is the creation of “crises” that sell newspapers and TV air time. For our purposes, we need to focus on our long term goals, save regularly, allocate our investments across many asset classes, monitor regularly and adjust very little.
Tax Implications
Having said that, we will probably see taxes rise in the next couple years. What is still unknown IS WHICH TAXES will change and how much. My guess is capital gains will increase, probably 5 to 10%. I will look at the impact for my clients and let you know if we need to do something before year end. There is more discussion about the mortgage deduction going away or being reduced over the next several years That would be a temporary setback for sure, but we used to deduct our car loan interest and credit card interest. And now we’ve gotten used to not doing that.
The reality is our tax rates our not incredibly high and we spend way too much money on defense and entitlements. If we give a little on all of those, nobody gets hurt all that badly and we can move on. It is important we slow the debt down, even if we don’t pay any of it off immediately.
I take very seriously the trust that my clients place in me to be their financial advisor. I get to know their investment likes and dislikes, their goals and time frames, their fears and biggest obstacles. I help them understand their possibilities and make informed decisions. I would like to do the same for you. If you’d like to discuss how I could be your “financial point man” simply send me an email.
BEST WISHES FOR THE HOLIDAYS AND A VERY PROPEROUS NEW YEAR!