Displaying items by tag: budget

(Washington)

Advisors and their clients have spent the whole summer dreading Biden’s tax plans. Two of Biden’s budgetary linchpins for raising taxes on the wealthy are: nearly doubled capital gains taxes and the elimination of the step-up in basis in inheritance. Until now, they had merely been proposals. However, yesterday the House Democrats passed a budgetary resolution to bring a full vote on the topic. It is expected to pass along party lines.


FINSUM: The Democrats have a very narrow path to getting this passed as part of their $3.5 tn spending package. However, if they can get every Democrat in the Senate to sign, it becomes a reality.

Published in Wealth Management

(Washington)

The last couple of months has been very tense for advisors. Not only have discussions around a renewed version of the DOL rule been swirling, but highly significant tax hikes are pending. Biden is planning a huge multi-trillion Dollar increase in spending, which means tax hikes are almost a certainly. And none of them is more worrying than the hike on long-term capital gains taxes, which Biden wants to push up to 43.4% vs 23.8% now. That is scary in itself, but here is the truly worrying part: experts think it will take effect May 27th (next Thursday). This would be simultaneous to his announcement of his full budget.


FINSUM: Evidently Biden doesn’t want to give advisors and accountants time to game plan around his changes, so he wants them to go into effect immediately upon release of the budget (and they could even be retroactive).

Published in Wealth Management
Wednesday, 01 May 2019 12:18

The Big US Tail Risk

(Washington)

Don’t look know, but market could be facing a big risk in September. Investors will remember that Congress voted to suspend the debt limit until March 1st. That date has come and passed and now the Treasury is using extraordinary measures to meet the US’ payment obligations. However, it says it will exhaust those options by September, meaning the US could end up in a major cash crunch.


FINSUM: Get ready for another early autumn political crisis over the budget, deficit, and debt ceiling.

Published in Bonds: Treasuries
Wednesday, 30 January 2019 10:25

The Deficit is Ballooning

(Washington)

Investors may not be thinking about it much, but that does not mean the US deficit is not continuing at massive levels. This year will see another $1 tn shortfall in the US budget, a fact that the US Treasury will have to make up for by issuing lots of debt. This will be the second straight year of $1 tn Treasury issuance. So far the market has been happy to absorb the extra debt, and as such, the Treasury is planning to maintain a similar schedule of issuance this year.


FINSUM: The market seems to be a long way from having its fill of Treasuries, but at some point yields will move higher simply as a force of extra supply.

Published in Bonds: Treasuries
Tuesday, 23 October 2018 09:23

Italy is About to be Downgraded to Junk

(Rome)

Italy looks like it is in bad shape. It is openly defying the EU’s budget rules by running an excessive deficit, and what’s worse, it looks likely to be downgraded to junk status by ratings agencies. Moody’s already downgraded the country to Baa3, its lowest investment grade rating and just one rung above junk status. Yields have been swinging wildly on the country’s bonds as a result.


FINSUM: We are quite worried about the implications if Italy gets downgraded to junk, as it could mean lots of funds need to sell the bonds because of their mandates. What kind of sell-off could that spark?

Published in Bonds: Dev ex-US

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