Displaying items by tag: tax cuts

(New York)

While the market has not been doing so well this year and there are many warning signs, there are some positives too. One great sign for markets is that earnings are very strong. First quarter earnings season looks to be a great one, but what will that do for the markets? This year is supposed to be the best for earnings growth since 2010, but that is exactly the problem—great earnings this year have been forecasted for a while because of the strong economy and tax cuts. That means all the risk appears to be to the downside rather than the upside.

FINSUM: We think this round of earnings have little margin for error as everyone is expecting them to be great.

(New York)

One of the most popular fixed income assets for wealthy US investors are municipal bonds. Their tax exempt status has made them continually popular, but what will their fate be during a period of rising rates? There are currently fears that tax cuts and rising rates will wound the sector, but one top financial advisor says the muni sector “will retain its rightful position as a place where wealthy Americans protect their wealth”. Despite rising rates there will be lower issuance this year, which will protect the sector. Additionally, tax cuts for the wealthy will be modest, and not really enough to damage munis. “They will still be a relative value compared with other fixed-income, high-grade asset classes”.

FINSUM: We suspect munis will continue to have a high degree of demand, and if issuance stays low, then those are two important supportive factors. However, some municipalities are facing big budget and pension issues, which could pose a risk.

(New York)

There are currently a lot of catalysts for small caps. The idea of favoring the segment started around the time of Trump’s election, when import tariffs seemed likely. Trump’s America first stance was also generally seen as favorable to small caps, which tend to have a high proportion of domestic sales compared to their larger cap peers. Now, with Trump set to implement metal tariffs and the threat of a trade war looking like a reality, small caps may once again shine, as they would be shielded from most of the international trade fallout. Furthermore, small caps will benefit the most from the new tax cut package.

FINSUM: There are a lot of catalysts that will help small caps. It seems like a great time to buy.