Eq: Total Market

(New York)

You know the whole narrative already—Donald Trump will boost spending on infrastructure and through other forms of fiscal stimulus, which will push wages and inflation up. Investors have bought into the notion, with yields rising sharply since his election victory. However, this piece says this view is all wrong and bond markets are very oversold. Why you might ask? Because of debt. One of the very consistent and apparent data points over the last few decades has been that as debt rises, it gets harder and harder to create inflation, as it takes ever more money to create the same amount of economic growth. Other evidence suggests that big infrastructure projects don’t create inflation because they can actually cut expenses by making things more efficient—the New Deal in the 1930s and 1950s-era highway construction did not boost inflation, for instance.

FINSUM: This in an in-depth article that presents a number of data points that show inflation may not rise nearly as quickly as investors expect. History suggests that inflation expectations, and thus higher yields, might be unreasonable right now.

Source: Wall Street Journal

(New York)

There have been a lot of articles out recently about how Donald Trump might impact the real estate market—higher rates equal lower demand and lower prices, so the thinking goes. This article, however, says things are already looking very bad in commercial real estate, and that higher rates and a new Dodd-Frank regulation are arriving at the absolute worst time. Delinquency rates are rising among borrowers and sales in multi-family residential units are dropping, highlighting weakening conditions. Now, a Dodd-Frank regulation that will require issuers of mortgage-backed securities to keep at least 5% of the bonds is threatening to tighten the market further as lower lending could make refinancing much more difficult. Speaking about the new rules, the director of commercial real estate research at Moody’s says “You couldn’t have planned worse timing”.

FINSUM: Commercial real estate is a market we pay fairly close attention to, and things are looking bad. Delinquency rates are rising, sales are slowing, and anecdotally, retail space rental seems to be slowing in a number of major markets.

Source: Wall Street Journal

(New York)

Markets have already surged at the prospect of lower corporate taxes, but this article focuses on the personal income side, discussing how both middle class and wealthy investors can take advantage of the tax cuts Trump has proposed. Wealthy investors will best be able to utilize the tax code changes, but there are things everyone can do to reduce their tax bill. Many expect the tax changes to happen next year, so there are things you should do now to prepare. For instance, those who get paid on commissions or small business owners should defer income until January to take advantage of 2017’s lower rates. Retirees can also stop drawing from their 401(k) this year, which will lower their tax bill now and will lessen their rate when they replenish their cash supply. Property taxes and mortgage payments should be moved into 2016 to maximize benefit as well. Additionally, moving big medical expenses into this year would make sense, as expenses over 10% can be written off (7.5% for those over 65).

FINSUM: This article is full of good tips for how to take advantage of existing tax breaks before they expire, as well as how to minimize taxes under the incoming system.

Source: Bloomberg

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