Displaying items by tag: US

(Washington)

The Trump administration is exploring a new $100 bn tax cut for Americans. The plan, which is designed to potentially bypass Congress, will try to use the Treasury Department’s own power to enact the cut. The core idea of the cut is to allow investors to account for inflation when calculating capital gains. What that effectively means is that investors could walk up their basis in shares as time progresses, minimizing the taxable portion of their gains. The cuts are far from final, as Treasury head Mnuchin says he is not even sure if the Treasury has the authority to do so. Mnuchin commented on the cuts that “We are studying that internally, and we are also studying the economic costs and the impact on growth”.

FINSUM: This cut makes logical sense to us, but there is already backlash in the media that this is a major gift only to America’s wealthy.

(Miami)

Bad news continues to mount in the real estate market. While commercial real estate is seeing big players move out as prices are rich and inventory plentiful, residential real estate has been healthier but is just showing the first signs of strain, with inventories rising and home sales dropping. Now, more bad news. New data shows that foreign investment in US real estate is dropping quickly. In the year ended in March, sales of US homes to international buyers dropped 21% to $121 bn, the biggest ever annual drop. The drop will mostly affect high-priced US destinations like New York, San Francisco, and Miami, where foreign buyers account for a much larger percentage of the overall market, especially at the high end.

FINSUM: The bad news is starting to pile up for real estate. One wonders how a downturn might play out. Given that lending for residential real estate has been modest compared to pre-Crisis, we don’t expect this to be a grave correction.

(Washington)

The whole market has been waiting on today’s GDP report for weeks, and this morning it finally hit the tape. With so much anxiety about the possible impact of a trade war, coupled with the expectation that the tax cut gave the economy a big boost, it is hard to remember a time when a GDP report was more relevant. Well, the figure is in, and it is a winner—the US economy expanded at 4.1% in the second quarter.

FINSUM: This is a great number, but the issue is that it takes very little of the most recent developments—trade tensions—into a account because it is for the second quarter only. We imagine the third quarter GDP figure will be even more important.

(New York)

The US commercial and residential real estate markets have been headed in opposite directions for a little while now, with the former looking weak and the latter looking strong. However, new data suggests that US residential real estate now looks headed for its worst downturn in years. The market is suffering from heavy prices and rising rates, which are constraining buyers. Those realities are now starting to play out in the data, as the latest US market info shows that existing home sales dropped in June (for the third straight month), new home purchases are at their slowest pace in eight months, and inventory is finally starting to increase. Annual price gains in May were also their slowest in almost a year and a half.

FINSUM: It is still early days to predict a big downturn, but these three data points are a big warning sign. We are especially paying attention to rising inventory, as really tight supply has been the hallmark of the market for at least five years.

(Washington)

President Trump may have just ended a major part of the current trade war. All eyes have been focused on the President’s meeting with European Commission head Juncker today in Washington, an encounter that could spark trade fireworks between the US and EU. Most have said they have little hope of a positive outcome. Now, that might be entirely changed as the president last night tweeted out what must be the most hopeful statement of the whole trade war. He said “The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them … Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies!”.

FINSUM: It would be absolutely amazing to go from an escalating trade war to a US-EU free trade panacea. It seems unlikely to happen, but it could be a positive sign of collaboration.