At the end of September, most major stock market indexes stood at all-time highs. The economy was booming and interest rates, while rising, still remained low by historical standards. Although the economic fundamentals have remained largely unchanged, merely one month later much has changed in the stock market. The S&P 500 has dropped by nearly 10% this month and, after leading the market higher for the past two years, Nasdaq stocks have taken a beating in October, closing down nearly 15%. This performance is the worst of any month since the financial crisis began ten-years ago.
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?
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.
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:
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%.