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I hope that you are enjoying the Holiday season.  As we approach the end of 2018, we wanted to give you a few updates regarding tax law changes and strategies.    

Itemized vs. Standard

One of the biggest changes to the tax laws this year was to eliminate the Personal Exemption Deduction entirely ($4,050 per person).  The Standard Deduction amount was then raised to $12,000 for single filers and $24,000 for married filers to help offset this change.  Many people that were previously eligible to deduct expenses such as healthcare costs, mortgage interest, real estate taxes, state income tax, charitable contributions and many other miscellaneous deductions will no longer have enough in total deductions to exceed the new Standard Deduction amount. To push more filers to the Standard Deduction, the entire Miscellaneous Itemized Deductions category was eliminated and the state income tax as well as real estate tax deduction was lumped together as one category and limited to no more than $10,000. 

Market Recap

As we pause to reflect at the midpoint of the year, so far 2018 has served as yet another reminder that over the short term, markets are driven by innumerable and often random factors that are impossible to consistently predict. In the first quarter, US stocks experienced their first major losses since 2016 and a return to more “normal” market volatility. Fast-forward through three more eventful months and US stocks have bounced back, gaining 3.4%, while foreign stock returns were hurt by an appreciating US dollar.

The first quarter of 2018 provided a jolt to investors that were getting used to low volatility.  Financial markets began the year on a tear; at one point in January, large U.S. stocks were up 8%. Then came February, which ushered in a 10% drop.

We have recently experienced a string of bad days in the stock market, that has created anxiety for some clients. We started 2018 on a strong footing, with the first three weeks of the year up very strong. Investors bid up stocks, reflecting a continuation of global growth trends. Growth in the US has been positive, albeit tepid, and there are no signs of recession or a slowdown.

Alsworth Capital Management - Fourth Quarter 2017 Investor Presentation Market & Portfolio Strategy Review, please click HERE

The fourth quarter capped yet another stellar year for US stocks. Large US stocks gained 6.6% for the quarter and ended the year with a 21.7% total return. This was the ninth consecutive year of positive returns for the index, tying the historic 1990s bull market and marking a truly remarkable run from the depths of the 2008 financial crisis.

As you have no doubt heard, the Republican Tax Bill was quickly shepherded through reconciliation and will almost certainly go into effect for the tax year 2018.  The big picture impact of the bill is that after making many last minute generous adjustments, 75% of Americans will see a tax cut to varying degrees and the remainder will see a tax increase.  The bill will also add a minim

Reconciling the two bills will require compromise on some key features. See this chart, provided by PIMCO Funds for a nice summary.

See Chart

Alsworth Capital Management - Third Quarter 2017 Investor PresentationMarket & Portfolio Strategy Review, please click HERE

There is a popular adage in investing, “Sell in May and Go Away!”  The idea is that you should sell your stocks May 1st and ignore the markets until November 1st when you get back in the market.  It happens to coincide with a time frame when many professional institutional traders go on vacation and investors are busy with summer plans.  Since the 1950’s, the va