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You can find reports from our Investment and Research team, timely and informative financial planning topics from our Wealth Management team, and deeper dives on various important topics in our white papers from any team member. Read online, share with friends, or download for your convenience.

Chart TCJA

When the Tax Cuts and Jobs Act (TCJA) was enacted in late 2017, arguably the largest beneficiaries were U.S. corporations. The TJCA cut the corporate income tax rate from 35% to 21%. This lower tax rate provided corporations with a huge one-time boost to their earnings. While no one can argue that the short-term benefits from the tax cut were very robust, the longer-term benefits are much less certain. Proponents of the TJCA argued that the tax reform would provide a meaningful boost to long-term growth, as companies would take excess earnings and invest back into their businesses via capital expenditures, thus brightening the future growth outlook. While business investment did pick up some over the last few years, we have certainly not seen an investment boom that many pundits predicted. In the chart above, the gold line represents year-over-year growth in durable goods orders which can be thought of as a proxy for business capital expenditures, while the black line shows year-over-year earnings growth of S&P 500 companies. As you can see, we did get a very strong boost to earnings growth; however, the predicted surge in business investment never materialized. Instead of accelerating investment, it appears that many businesses opted instead to return capital to shareholders via dividends and share buybacks. While dividends and buybacks help to boost short-term returns for investors, they provide little to no long-term benefit. As of today, it appears the promised long-term benefits from the TJCA have not come to fruition. 

2018 is now in the books. It was a less-than-stellar year for most investment classes. In many respects it was a tale of two markets. The first three quarters of the year were very good. Markets gained, confidence grew, and risk-on was the name of the game. In contrast, the fourth quarter marked a nearly 20% decline in the S&P 500 from peak to trough, confidence waned, and protecting capital became more important. Since bottoming on December 24th, equity markets have staged a nice recovery, regaining nearly half of the decline. However, increased volatility (both to the upside and downside) may not be over, at least not until some of the big issues are resolved. 

The distinction between a non-fiduciary broker and a fiduciary advisor is hugely significant, and pivots mainly around the level of care and loyalty owed to the client.  Allegiant Private Advisors chose the path of fiduciary early in our history.  

Fiduciary discussions can go down a legal rabbit hole pretty quickly, but here is a (hopefully) simple explanation of why being a fiduciary is such a core part of who we are at Allegiant.

The CFP (Certified Financial Planner) Board’s Code of Ethics and Standards of Conduct for CFP® Professionals defines fiduciary duty this way:

It is that time of year again! Your IRS tax forms will be available online and/or mailed to you over the next few months.  Online posting dates occur about five days prior to mailing dates. If you do not currently have online access and would like to take advantage of this tool, we encourage you to contact our office (941-365-3745) so we can assist you.  

Chart Two Data Sets

Most economic data come in two forms, hard data and soft data. Hard data measures actual economic performance, while soft data represents participant expectations. The chart above displays the year-over-year change in Industrial Production (the hard data), along with the ISM Manufacturing PMI (the soft data). As shown, a sharp divergence has recently emerged between the two data sets. Of note, the precipitous decline in survey data does not coincide with a concurrent decline in industrial production. This decline in expectations makes sense given current manufacturing headwinds, such as major trade disputes, a slowing housing market, a government shutdown, and numerous other geopolitical risks. However, these headwinds have yet to flow through to the actual economic data. Make no mistake, the two data sets will converge at some point. Whether they converge due to soft data rebounding or hard data declining will tell a lot about future economic activity.

For those unable to join us for Allegiant’s Quarterly Market Update at Selby Gardens on January 17, 2019, we had the pleasure of hearing a presentation from Commonwealth Financial Network’s Chief Investment Officer, Brad McMillan CFA®, CAIA, MAI. Brad is a frequent commentator on financial markets, U.S. economic policy, and the global economy for a range of media outlets, including the Wall Street Journal, CNBC, CNN International, Barron’s, and Bloomberg News. 

Brad’s presentation, entitled “Beyond the Numbers,” covered a broad range of topics. He examined recent stock market performance and the current state of, and outlook for, the U.S. economy.

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Today, balancing family obligations, career paths, and financial concerns are responsibilities often shared by those who also find themselves caring for aging parents and adult children. The Allegiant Private Advisors team examines how to manage this balancing act in a new article published online at SarasotaMagazine.com. 

Are you part of the Sandwich Generation? Click here to learn more

Chart Trucking Trends

For the past several years, trucking data has been a good indicator of the strength of U.S. economic activity. In particular, shipping volumes provide tremendous insight into both the manufacturing and industrial sectors. In a typical economic expansion, shipping volumes rise as businesses order additional supplies and send more finished products to their end markets. That trend is certainly true for much of the current economic expansion. However, shipment volume growth has weakened sharper during the second half of 2018 than previous years. This is another sign pointing to the possibility for slower U.S. growth going forward. However, slower growth does not necessarily mean no growth, or contraction. It will be important to see where shipping volumes go from here, as they are a good indicator for future economic growth. 

Chart Housing Market Dynamics

More than a decade since the housing bubble burst, the negative impacts are still permeating the U.S. economy. Although U.S. housing data has looked strong for the last few years, the recent negative impacts from tariffs, rising labor costs, and commodity price inflation are challenging the stability of the market. Prices of new construction are moving higher, putting pressure on demand. More importantly, rising mortgage rates have significantly impacted affordability, which has also slowed demand. Together, this has led to fairly weak housing data over the last 6 months. As evident by the chart above, the monthly supply of new homes moved significantly higher in the back half of 2018. This quick move higher is starting to impact builders’ confidence and a slowdown of new construction could be on the horizon. However, it’s possible only a short-term slowdown is necessary to rebalance supply and demand. With mortgage rates declining rather significantly over the last few weeks, we will be watching the impact increased affordability has on sales and price activity. 

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As we welcome the New Year, it’s a natural time to look forward. We all look forward to achieving goals - to be a better friend, to lose weight, or commit to achieving lingering professional goals. We look forward to a fresh start, a clean slate, and an opportunity to do and be better.  

The New Year is also a great time to review your finances with fresh eyes. Wealth Advisor Melissa Walsh, CFP®, CFA, recently authored an article on SarasotaMagazine.com suggesting five steps as a starting point if you are resolving to get your financial house in order in 2019. 

Click here to read the complete article.