Believe it or not, this will be my second crack at writing this article. After seeing the outrageous reactions that came from the election results, I decided to wait a few more days and reflect on the best way to offer a commentary on the outcome. I’m glad that I did.
Taking a few days to pause and focus on other things allowed me to read some additional comments from people in my profession, and it allowed me to regain focus on what’s important to each of the people we serve. You see, each of the families we work with are much, much more than their political opinions or beliefs. Aside from this year, very few conversations we ever have involved the identity of a political party or candidate. Instead, we focus on issues that matter to that family.
Yes, it’s very true that our government has a fingerprint on our everyday lives, and it will no doubt play a critical role in our nation’s future. But, as one of my industry mentors will say, “There is no good news or bad news, there is only news.” And, in this case, I agree. No matter how you feel about the outcome of the election, what happens now is how we plan and prepare for the future…Specifically, your future.
With that in mind, I’d like to share a few thoughts on what we may see coming on this horizon with a Trump administration.
Lower taxes. Trump was very vocal during his campaign about the need for tax reform and a simplification of the tax code. His proposal involves reducing individual tax brackets from 7 to 3 — 12%, 25%, and 33%. With Republicans in control of the House, Senate, and Executive branches, I expect tax reform to be one of the top priorities when Trump takes the oath of office. Critics of his tax plan state that it will increase the deficit because he hasn’t mentioned ways of funding these tax cuts by eliminating government expenses. Team Trump argues that allowing more money in the pockets of consumers and businesses will increase economic growth and cover the shortfall. We shall have to wait and see.
Repeal and Replacement of Obamacare. This was another key campaign promise of Trump’s that is very likely to happen. Few people realize that the House and Senate passed a repeal of ACA not too long ago; however, it was given the veto from President Obama. This legislation is still viable, and depending on what changes they new members of Congress want to see, it can likely be sent back to President Trump to be signed into law. A few items I expect will be included in that bill would be: removal of individual mandate (and possibly employer mandate), elimination of 3.8% ACA tax, price transparency from medical providers, and interstate competition between insurance companies. Trump has already been on the record stating that he’d like to keep the coverage for those with pre-existing conditions and allow kids 26 and younger to remain on their parents’ insurance. Two items that are rarely discussed but may be included in the conversation now are the dire need for tort reform and overhaul of the pharmaceutical industry. These two areas are key if you want to drive down the costs of healthcare, in my opinion.
Renegotiating NAFTA. Candidate Trump mentioned NAFTA a great deal during the campaign season, and it’s very likely he will have the political leverage to explore the terms of this agreement. Both Canada and Mexico have expressed a willingness to revisit the agreement, so it will be interesting what may come from these discussions. It’s important to our economy that we have a strong trade alliance with our 2 neighbors; however, technology has completely changed and evolved the marketplace since this agreement was put into place. I’m hopeful that a positive, win-win solution can be found.
Market Uncertainty. Our old friend remains. The stock market (specifically the DOW Jones) reacted very positively in the week following our election. Few, if any, saw this coming. Most market forecasters saw a Trump win creating upheaval in the markets, and they were wrong. Now, this last week is being referred to as the “Trump Trade,” and it is thought to be based on optimism for the days ahead. However, coupled with the increase in equity prices came a big spike in bond yields, which drove bond prices lower. I’m certain this has many investors in diversified portfolios wondering why their accounts are broken, as much of the stock gains were likely reduced or eliminated by the simultaneous drop in their bond holdings. With a Fed rate hike on the books as “very likely” for December, some of these movements could simply be investors repositioning their portfolios now that the election outcome is known.
Same ‘Ol Problems. President-elect Trump hasn’t taken office yet, so while he does have an agenda being tailored for his first 2 years before the next mid-term election, several of our nation’s problems are going to be waiting for him on day 1. Social Security and Medicare are in dire need of reform, but changes to these programs have been hard to come by—largely because they are often viewed as a political 3rd rail. Candidate Trump pledged to make no changes to Social Security; however, there are some practical reforms that can be implemented should he choose to work with Congress. This will likely draw criticism from some of his supporters—no doubt will be played as a broken promise by the media—yet he does have an opportunity since the Republicans have the House and Senate.
I could write more about foreign policy, geopolitics, social issues, etc…but many of those issues are quite nuanced and come with emotional ties for almost all of us. If you remember, my last article talked about the fact that presidents are not kings. That is still true today, post-election. Regardless if you are happy or unhappy with the outcome of the election, the best thing you can do—is continue to do your best to plan and prepare financially for the future. Markets will still be unpredictable in the short-term, tax laws may change, and new obstacles may arise as old ones fade away. The one thing that remains unchanged is the constant need for objective financial guidance and prudent planning. Controlling what we can control and not worrying about what we can’t control is the greatest key to long-term financial success.
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