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As the Federal Reserve has continued to raise overnight interest rates, talk of the flattening yield curve and subsequent recession has been increasing among investors. And with good reason, as seen in the chart below, the U.S. Treasury yield curve has inverted before each of the last six U.S. recessions. Not a bad record for an economic indicator. But what is a flattening yield curve and why is it so apparently bad for the economy?

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With US tariffs on steel and aluminum already in effect, tariffs on $34 billion of Chinese made goods scheduled to start on July 6th and threats of more tariffs affecting almost $800 billion in total of imported goods, it is no wonder that the business media and markets are worrying more about the possibility of a trade war.  While many commentators say these threats are simply negotiating tactics intended to bring our trading partners to the table, the specter of the Smoot-Hawley Tariffs and their crushing effect on global trade during the Great Depression tends to drive these worries.

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On December 22, 2017, the President signed into law the Tax Cut and Jobs Act (TCJA) and sent people and CPA's scrambling to make sense of it all.  We are not tax experts, and you should always check with your tax preparer, but we wanted to highlight some of the major changes and possible implications for you.  While the reduction in US Corporate taxes from 35% to 21% received the most headlines, there were many changes to individual taxes.  Some of the main changes are:

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Although Bitcoin has been in existence since 2009, it was originally touted amongst a relatively small group of passionate believers while remaining largely unknown to the general public. Over time, public enthusiasm surrounding Bitcoin and other cryptocurrencies has surged and the price has risen exponentially, attracting many amateur "investors" and speculators. Millennials in particular seem to be fascinated by Bitcoin and other perceived beneficiaries of blockchain technology. As a result, the price of a Bitcoin has skyrocketed by over 3,000% in the past two years. During this period, there have been six occasions when the price has corrected by at least 25%. In one particularly volatile day recently the intra-day price plunged by 50% before recovering to close down 10%.

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In the first part of this blog post, we discussed how much an investor can lose in the portfolio construction process if they don't use a good advisor as calculated in a Vanguard Group paper from 2014.  We also discussed how Covenant approaches those aspects of the portfolio construction process to add that value for our clients. The parts of the study discussed previously showed a loss  of anywhere from 40 basis points (0.40%) to 115 basis points (1.15%) a year depending upon the clients' tax bracket and asset mix.   This did not include any value from the correct asset allocation or a total return approach, which were deemed significant, but not quantifiable.  In this part, we move on to the Wealth Management and Behavioral Coaching services described in the study and that Covenant provides.

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