Clear Path Advisory

On It With Offit Newsletter - October 2017

 
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My wife and I are coming up on our 4 year wedding anniversary on November 30th, 2017. Hard to believe how time goes so quickly. I feel so lucky to be married to my amazing partner who is way out of my league!
Ben Offit and Clear Path Advisory were exhibitors at the Maryland Chiropractic Association convention in Gaithersburg, MD in October. We were fortunate to meet some great people and medical professionals that we look forward to having long lasting relationships with.

On The Road To Clarity...

Market Commentary
EQUITY MARKETS
New record highs were set once again in October as the S&P 500, Dow Jones Industrial Average, NASDAQ, Russell 1000, Russell 2000, and Russell 3000 all eclipsed their prior peaks during the month. The S&P 500 has increased just over 20% since the election and has not even had a correction of 3% in 361 days, the second longest such run since 1928. Growth stocks outperformed value stocks and large cap stocks outperformed small cap stocks for the month. Developed international stocks trailed their large cap U.S. counterparts, while emerging markets outpaced the S&P 500.

FIXED INCOME MARKETS
Interest rates increased across the yield curve for the second consecutive month. The yield on the 10-year Treasury increased five basis points in October to 2.38%. The Bloomberg Barclays Aggregate Bond Index posted a modest increase in value for the month. Credit positions were once again rewarded as corporate bonds increased in value and high yield bonds hit record highs, while treasuries posted losses. Municipal bonds advanced modestly.

ECONOMIC DATA
The economy rebounded in September from August’s hurricane-related slowdown. The ISM Manufacturing Index rose to its highest level since May 2004 and the ISM Non-Manufacturing Index hit its highest level since August 2005. The advance estimate of third quarter real gross domestic product (GDP) surpassed expectations and registered 3% growth. This marks the first time the U.S. has logged two consecutive quarters of GDP growth in excess of 3% since 2014. New home sales spiked to their highest level since October 2007 and retail sales were the best since March 2015. Job creation disappointed during the month, as non-farm payrolls lost 33,000 workers. On the flip side, unemployment reached 4.2%, the lowest level since January 2001. It is likely both these numbers were impacted by the hurricanes. Consumers remain upbeat as reflected by the Conference Board Consumer Confidence Index, which is at its highest level since December 2000. The Federal Open Market Committee (“FOMC”) will conclude its two-day meeting on November 1st and no rate change is expected. The last FOMC meeting of the year is scheduled for December 12-13 and currently Fed funds futures are indicating an 82.8% probability of a rate hike at that meeting.

*The S&P 500 is a stock market index that tracks the 500 most widely held stocks on the New York Stock Exchange or NASDAQ
*The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ
*The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market
*The Russell 1,000 is a list of the 1,000 largest US Public companies, The Russell 3000 is a list of the 3,000 largest US Public companies, The Russell 2000 is a list of the bottom/smaller 2,000 companies of the Russell 3000 list.

Financial Planning Tips

After more than a year of buzz from both House Republicans, and President Trump, the House GOP unveiled the actual draft legislation of its proposed tax reform – kicking off the messy process of Congressional compromises that may still be necessary to actually pass the reforms into law, but providing a first real glimpse at exactly what is on the table.

While the proposals of the “Tax Cuts and Jobs Act” are not quite the sweeping level of “file your tax return on a postcard” that Republicans had proposed early on – as the inevitable push for compromises eliminated the elegant simplicity of the original version – the House GOP proposal nonetheless represents some of the most significant tax reform in more than 30 years, with a reduction in the number of tax brackets from seven to four with the same top tax rate of 39.6% (albeit with a 6% surtax for a portion of income over $1M that effectively creates a new 5th tax bracket at 45.6% before reverting back to 39.6% again), the repeal of the AMT, and substantial simplification employee fringe benefits, college tax preferences, and itemized deductions… along with a near doubling of the standard deduction that will make itemizing a moot point for most individuals anyway.

On the other hand, the proposed changes also bring a whole host of crackdowns that will likely trigger complaints for many – but then again, sweeping tax reform virtually always means that everyone has at least some pet deduction or tax credit to lose. Though for many, the negatives will be made up for most of the middle class by the expanded standard deduction, an increased $1,600 child tax credit, and a new “Family Flexibility Credit” of $300, fewer (and for many, lower) tax brackets, while more affluent business owners will be attracted to the opportunity for many types of pass-through business income to be taxed at favorable 25% tax rates, as well as a (delayed) repeal of the estate tax (starting in 2024).

Ultimately, it remains to be seen whether or how much the Tax Cuts and Jobs Act will be altered from here, as the messy process of compromise begins in an effort to garner the necessary votes to actually pass the legislation. Nonetheless, the fact that so many compromises have been brought already, from the original House GOP framework, and the fact that the GOP already laid the groundwork to pass the legislation with an up to $1.5T deficit projection under budget reconciliation rules (which only require 51 votes in the Senate and cannot be filibustered), suggests that legislators are truly positioning this proposed tax reform legislation as something that can garner enough votes to pass (as in current form, it is projected to cause a $1.487T revenue loss over 10 years, just under the budget reconciliation threshold). Which means that while some of the exact details may shift, the current proposal has a real chance of being passed in the coming month, setting a new foundation for the Internal Revenue Code (and individual tax planning) in the coming decade! – read more at kitces.com

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.


Clear Path Advisory, Inc.
1777 Reisterstown Road Suite 285
Pikesville, MD 21208
T - 410 486 5242
F - 410 486 5243
E – ben@clearpathadvisory.com
W- www.clearpathadvisory.com
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Interesting Tidbits!

Research by Nobel-winning economist Angus Deaton has shown that money stops adding significantly to people’s happiness at an annual salary of $75,000 or after they have attained $550,000 in wealth.
-The Week, October 27, 2017

E-commerce has created more jobs than it has displaced, adding 178,000 positions over the past two years compared with the 123,000 that have disappeared in brick-and-mortar stores.
-WSJ.com, October 15, 2017

Walmart told investors that by shortening the paper receipts given to customers, they saved the company $7 million.
-CNBC.com, October 10, 2017

“The stock market is a device for transferring money from the impatient to the patient.”-Warren Buffet

Crime has become so rare in Japan, with only one fatal shooting in 2015, that police often have nothing to do.
-The Economist, May 18, 2017

NFL players make an average of $1.9 million a year. Yet 15% of them end up declaring bankruptcy.
-CNBC.com, October 13, 2017

Some 71% of Americans express regrets about their ability to manage money. The #1 regret- not planning early enough (48%), followed by spending too much on nonessentials (39%).
-MarketWatch.com, October 18, 2017

A private room in a nursing home now costs more than $8,000 a month, or $97,455 a year. That’s an increase of 5.5% from just one year ago and a nearly 50% increase since 2004.
-Forbes.com, September 26, 2017

Gen Xers and Millennials now make up 18% of the millionaires in the United States, but only 58% of them work with an advisor. By 2030, these two generations will surpass baby boomers in holding the most wealth in the country.
-Fidelity Millionaire Outlook Study, October 17, 2017

More Americans live in Puerto Rico than in 21 states. The U.S. territory’s GDP, about $103 billion, would rank 37th if Puerto Rico were a state.
-CNN.com, Tuesday, September 26, 2017

If Amazon were a U.S. state, it would rank fifth in terms of job creation in the 12 months ending in June, 2017. Only Texas, California, Florida, and New York added more jobs over that time period.
-Bureau of Labor Statistics
 
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Clear Path Advisory, Inc. is not affiliated with Kestra IS or Kestra AS.

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