House Tax Plan - 2017

House Republicans are pushing for a major tax reform. Below, we have included links to a number of the documents the House of Representatives has made available to explain their tax plan.

We also expect the government will provide a calculator that will be available to the public to compare individual tax obligations between the current tax system and the proposed tax plan.

We will continue to provide updates as more information becomes available.

Please call or email us with any questions.

House of Representative Tax Proposal - POLICY HIGHLIGHTS
House of Representative Tax Proposal - CHARGE & RESPONSE
House of Representative Tax Proposal - TAXPAYER EXAMPLES
House of Representative Tax Proposal - TAX CUTS AND JOB ACT

Fed holds tight on rates today but sets the table for rate hike in December

The after effects of hurricanes Harvey, Irma, and Maria have done little to sway the opinion of Federal Reserve members that the economy is ready for further rate hikes. While leaving rates unchanged at today's meeting - as expected - they set the table for December. The Fed essentially waved off the hurricane-related September payrolls declines, and more notably strengthened rhetoric about economic growth, which they now characterize as "rising at a solid rate" compared to September's "rising moderately." Meanwhile the Fed added text noting a pickup in business fixed investment over recent quarters. In fact, it's hard to find much in today's statement that would put a December rate hike in doubt.

Despite the hawkish tone of the statement, market odds of a December rate hike were little changed following the statement, moving to 87.5% from 82.8% two days ago. That said, just two months ago the markets had 34.5% odds on a third rake hike in 2017. Looking further ahead, markets are pricing in one to two rate hikes in 2018. We think three hikes next year more likely, as improved economic and tax policy out of Washington push economic growth higher.

In the meantime, the Fed will continue to reduce its balance sheet at a pace of up to $10 billion per month for the fourth quarter, increasing that to $20 billion monthly pace in the first quarter of 2018, $30 billion in Q2, $40 billion in Q3, and $50 billion in Q4. After that, the Fed is projecting it would maintain that $50 billion monthly pace until it's satisfied with the size of the balance sheet. (For the foreseeable future, the balance sheet cuts would be 60% in Treasury securities and 40% in mortgage-related securities.)

With today's statement in the books, focus is now on President Trump's announcement of the next Federal Reserve Chair, expected later this week. According to reports from the Wall Street Journal, current Fed Governor Jerome Powell will be nominated for the position, beating out Vice President Mike Pence's top choice (and ours too), Stanford Professor John Taylor. The question now is if Taylor will be selected to fill the Vice-Chair position left open following Stanley Fischer's departure in October.

There were no dissents from today's statement, not even Minneapolis President Neel Kashkari, who has made dovish comments and voiced dissent to further rate hikes as recently as June. It appears the Federal Open Market Committee is in agreement that the improved outlook for the economy - and expectations of inflation rising towards the Fed's 2% target - justify the continued steady process of making monetary policy a little less loose.



This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable but no guarantee is given to its accuracy.
Source: Brian Wesbury, First Trust

FAANG Stocks lead the broader market to new highs

Stocks were up-and-down last week as a mixed batch of earnings reports stalled the market’s momentum. Technology led all sectors with favorable updates from Amazon and Microsoft, and strong pre-orders for Apple’s iPhone X. After their recent, and brief, pause, the FAANG group of large cap technology stocks again led the broader market to new highs. Healthcare lagged all sectors on underwhelming earnings results, particularly among biotech companies, and a shift in industry dynamics. Amazon has received regulatory approval for wholesale pharmacy licenses in twelve states; the recent revelation has raised investor concerns for traditional drug distributors and retailers. On Thursday, the media announced that CVS Health is in negotiations to purchase Aetna; the deal would represent a healthcare triple play in a first-ever combination of a pharmacy retailer and pharmacy benefits manager and an insurer. Meanwhile, Treasury yields closed at their highest levels since March; strong economic data and the Federal Reserve’s gradual tightening of monetary policy should place continued upward pressure on rates. Indeed, the 3.0% estimate for 3Q GDP growth exceeded expectations of a +2.5% rate of expansion; highlights included a slowdown in personal consumption and increased spending on durable goods such as cars, appliances, and furniture. The report suggests a mixed impact from Hurricanes Harvey and Irma; continued strength in business investment provides some momentum heading into the final two months of the year.

* Source: Pacific Global Investment Management Company

Market/Index as of 10/27

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.



Market Week

Other economic headlines last week included strengthening oil prices, passage by the House of the Senate’s budget resolution, and indications that President Trump will soon announce his selection of the next Federal Reserve Chair. Brent crude oil, the international benchmark, closed above $60 per barrel for the first time since July 2015 on improving demand. Also, last week, Saudi Arabia and Russia declared their support for an additional nine-month extension to the current production agreement which runs through March 2018. Also, energy company executives have indicated in conference calls that shale oil producers are shifting focus from maximizing production to sustainable profitability; this change in priority should support the recent rally in crude prices. On the tax front, the House approval of the Senate’s budget enables a fast-track “reconciliation” procedure, a filibuster-proof approach, to tax reform legislation. Much negotiation remains as the House has still not revealed details of the proposed legislation. As to the next Fed Chair, President Trump announced that he will nominate the next Fed Chair before he departs next week on his trip to Asia.

This week, earnings season continues with 131 companies in the S&P 500® Index, including Aetna, MasterCard, Pfizer, Estee Lauder, Facebook, and Apple reporting results. Of the 274 companies in the Index that have thus far reported, 66% have exceeded analysts’ sales estimates and 76% have exceeded analysts’ earnings per share (EPS) estimates. The quarter’s blended sales growth rate (which includes actual and estimated results) improved from 4.9% last week to 5.6%; and, the blended EPS forecast improved from 1.7% to 4.5%. The upgraded projections reflect a faster-than-expected recovery from the hurricanes as well as an improvement in overall economic conditions. Specifically, impressive results in the transportation sector confirm an acceleration in industrial activities which could, in turn, serve as a catalyst for a new cycle of growth and investment.

*Source: Pacific Global Investment Management Company



Last Week's Headlines

  1. The first estimate of the third-quarter gross domestic product showed economic growth at an annual rate of 3.0%. The second quarter grew at an annual rate of 3.1%. Each succeeding estimate (three in all) is based on more complete data. The increase in the GDP in the third quarter reflected positive contributions from personal consumption expenditures (consumer spending), private inventory investment, nonresidential (business) fixed investment, exports, and federal government spending. These increases were partly offset by decreases in residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
  2. Good news on the manufacturing front as new orders for long-lasting goods (durable goods) gained $5.1 billion, or 2.2%, in September. This increase follows a 2.0% rise in August. Also increasing in September were shipments (1.0%), unfilled orders (0.2%), and inventories (0.6%). More importantly, new orders for durable goods are up 5.2% over the last 12 months.
  3. The number of sales and average selling prices of new homes soared in September following a poor August. Sales of new single-family houses were at an annual rate of 667,000, 18.9% above the revised August rate of 561,000 and 17.0% ahead of the September 2016 estimate. The median sales price of new houses sold in September 2017 was $319,700 ($303,800 in August). The average sales price was $385,200 ($364,300 in August). The estimate of new houses for sale at the end of September was 279,000, which represents a supply of 5.0 months at the current sales rate.
  4. The trade in goods deficit was $64.1 billion in September, up $0.8 billion from August. Exports of goods were $129.6 billion, $0.9 billion more than August exports. Imports of goods for September were $193.7 billion, $1.7 billion more than August imports.
  5. In the week ended October 21, the advance figure for initial claims for unemployment insurance was 233,000, an increase of 10,000 from the previous week's level, which was revised up by 1,000. The advance insured unemployment rate remained 1.3%. The advance number of those receiving unemployment insurance benefits during the week ended October 14 was 1,893,000, a decrease of 3,000 from the previous week's level, which was revised up 8,000.



Eye on the Week Ahead

The Federal Open Market Committee is expected to raise interest rates this week as inflation and economic growth seem to be moving upward. The jobs report for October is out at week's end. September saw the number of new jobs decrease for the first time in several months. That trend is expected to be short-lived.



Fortem Financial 2017. All rights reserved. Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/ Market Data (oil spot price, WTI Cushing, OK); (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Carefully consider investment objectives, risk factors and charges and expenses before investing.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.


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