The U.S. Congress on Friday put the final touches on the biggest revision of the U.S. Tax Code since 1986, requiring immediate attention to reduce your 2017 tax liability before the year ends.
While the exact timing was not yet set, the Tax Cuts And Jobs Act was expected to be ratified by majority votes by the Senate and House Congress next week and signed into law by President Trump before the end of the year.
The new law provides $1.5 trillion in lower taxes over the next decade. It will eliminate or limit many deductions in 2018, creating many last-minute opportunities to cut your tax bill by the end of 2017.
The legislation is still not guaranteed to be enacted, but it is hurdling toward passage. The exact wording of the new law was released Friday evening. We will be updating you with tax-saving tactics in our email newsletter over the next two weeks.
In other news affecting your wealth, the Federal Reserve on Wednesday revised its expected growth rate for the economy in 2018 up from its September forecast of 2.1% to 2.5%. Thus, in three months, the nation’s central bank hiked the growth rate by 25% – a large revision.
The unemployment rate was also revised to reflect a much brighter outlook for 2018, with the unemployment rate now expected to average 3.9% in 2018 – lower than the 4.1% rate of unemployment that had been expected in September.
Significantly, despite the faster growth forecast, the Fed did not raise its projection for inflation. Faster growth with no rise expected in inflation is a formula for stronger real growth.
Retail sales figures released Thursday by the U.S. Census Bureau confirmed that a strong surge was underway in the last few months. Excluding gasoline, because its volatile price can distort the trend, total retail sales in the 12 months through November 2017 rose by 5%. That’s much higher than the 3.1% peak growth rate for retail sales in the last economic expansion.
Stocks repeatedly have broken records for months and they did it again on Friday. Despite lingering uncertainty about tax reform, a major political scandal, the nuclear standoff with North Korea and no shortage of other worries, the Standard & Poor’s 500 stock index closed Friday at a new all-time high of 2675.81. The index has soared more than 20% in the past year and stocks have played a starring role as the key growth component in diversified portfolios.
A 10% or 15% drop could occur at any time on bad news, and the chance of a bear market decline of 20% or more increases as the eight-and-a-half-year bull market grows older. However, the newly released Federal Reserve forecast for the U.S. is bright, the world economy is growing in synchronicity with the U.S for the first time in many years, and the new tax law is expected to bump earnings estimates higher, and earnings drive stock prices. So the bull market could continue, possibly for a long time, and head higher still.