Could the US stock market become vulnerable?

US stocks managed to bank significant gains during the 2018 summer, although this was considered to be a historically bad period for stocks. The S&P 500 managed to break above the January high and got past the 2,900 figure.

Tech stocks and the Nasdaq Composite had been leading the market in terms of gains, with the Nasdaq reaching the 8,000 milestone.

With share trading so hot in the US these days, some analysts are beginning to ring alarms, claiming that “dark clouds” can be seen on the horizon. With that being the case, let’s see what will be the challenges for the US stock market in the last quarter of 2018 and what needs to happen in order to see a continuation of the impressive bull run.

US-China relation in the first place

What seemed to be just a tossing around is getting more and more serious. With a deal already reached with Mexico, one already in negotiation with Canada, with the EU expected to agree on a series of trade measures as well, it seems like the purpose of this trade debacle had China and its massive trade surplus with the US in the center stage.

This isn’t just about trade at all, is about who will be the next world’s dominating power. Share trading could become more volatile if the situation will escalate further. The China 2025 program seems to be one of the greatest threats for the US dominance, so President Donald Trump is determined to take whatever measures will be required.

Source: pixabay.com

He recently stated that another round of tariffs on $267 billion worth of Chinese imports are “ready to go”. The next had triggered a short-term spike lower on stocks, showing that investors are really anxious about this trade dispute.

Almost two months ago, tariffs on $200 billion worth of Chinese imports were put under supervision, with the implementation date being expected this month. Which means those $267 represent other imports, bringing up the tariffs to almost all imports from China.

The US administration finds itself in a very delicate situation since the midterm elections are due to take place in November. A bad management could lead to the Republicans losing some seats in the Congress which will make it harder for the US president to go on with his agenda. Despite impressive corporate profits, politics and trade will again be on the center stage in the next few months.

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Tax Benefits of Real Investing in 2018

Is it any wonder the Tax Cuts and Jobs Act benefits real estate investors when the president-elect made his “fortune” in real estate? Is it any wonder he passed the bill yet failed to divest his business interests as legally required to do so? No matter which side of the political fence you’re on, if you’re a real estate investor or looking to become one, Donald Trump is your presidential dream-come-true. Experts argue the bill will not benefit those it claimed to benefit, and this bears noting for moral reasons alone, but it will give the following advantages to real estate holders, so take this into account, too.

Depreciation Bonuses

Kent Clothier of the Forbes Real Estate Council reports that one of the greatest advantages of the new tax bill is its depreciation bonus. When investors buy property from 2017 forward – yes, the bonus is retroactive – they can reap the benefits of a 100-percent, five-year depreciation deduction. As long as you invest in real estate prior to 2022, and as long as you purchased the investment property and had it up and running by September 2017, you can depreciate 100 percent of your property holdings. After 2022, the break will be reduced by 20 percent each year, so take advantage of this perk now.

Corporate Tax Deductions

Controversial as it may be, wealthy business owners will see a huge decrease in their corporate tax rate thanks to Trump and his Congressional backers. What was once a 35-percent corporate tax rate is now a 21 percent one – wow. For those whose business is real estate investment, such as Peter Foyo, the champagne corks must be flying. Open up a business entity exclusively devoted to commercial real estate investing, and then enjoy reduced corporate tax rates and cuts to taxation of your pass-through income. In other words, you’ll see more profitability from your real estate investments.

Free Diversification

If you already own real estate property, Section 1031 of the Internal Revenue Code gives you a reason to pop a champagne cork, as well. In this case, Clothier reports that the new tax laws allow investors to diversify their portfolios without an “immediate tax hit.” This means you can trade real estate to reduce your loss exposure and defer any related tax obligation to the future. Any financial expert will tell you that portfolio diversification is key to your success, and with the ability to diversify without consequence, it might be time to talk with Foyo or another expert and secure additional real estate.

Other Investment Savings

To go off topic for just a moment, the new tax law also benefits those invested in long-term savings plans. If you hold an ESA, HSA, IRA, and/or 401(k) – that’s a lot of acronyms – you might enjoy a reduction in your tax obligation each year. The new law includes “immediate reductions to taxable income and decades of tax-deferred gains or tax-free investment gains,” according to Clothier, and it’s even better if you roll your high-risk investments into more secure long-term savings plans. By the way, you can also use these accounts to invest in real estate, as some plans include those holdings.

The real estate market has made a huge rebound from the 2007/2008 financial crisis, and many investors have gotten over their fear of these holdings. A diverse portfolio includes numerous financial vehicles, and real estate is once again one of them. With new tax laws written to benefit real estate investors, it makes sense to enter into this lucrative market wisely. Don’t go crazy. Nonetheless, if the president sees his four-year term to fruition, you can rest assured he’ll continue to work to benefit real estate investing. After all, it benefits him, too, so dive in while the getting is good.

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Gold Investment During Tumultuous Times

Gold is proving its evergreen commodity status. Currently priced at $1,358 per ounce, it’s defying expectations by maintaining its price, showing consistency not found since July 2016. What’s more, gold is predicted to keep rising by Goldman Sachs, who have this week asserted that it will continue to outperform other commodities amidst fears over a market correction.

The shifting political landscape and rocky future outlook are creating problems for many markets, making securing a good investment a difficult proposition. Bucking the trend, gold is arguably profiting from global changes to its own benefit.

Trade wars and improving outlooks

The past month has been dominated by headlines concerning a trade war as hostilities ramp up between the USA and China over perceived transgressions. Typically, this would create uncertainty between the markets. Take the unexpected Brexit vote over in the UK; the result wiped $2tn off stock markets in panic. However, if you check the gold price at Money Metals Exchange it becomes apparent that gold continues to grow, never dropping under $1,000 since before 2010 and growing $5 per ounce on the back of the announcement of Trump’s China tariff. The reasons for this are varied, but Bloomberg have detailed how gold investors have out-thought hedge funds, demonstrating confidence in the commodity - despite political uncertainty.

The power of inflation

For the first time since late 2008, inflation is set to rise far above the 2% guideline in America. Reuters have explained the reasons behind rising inflation, and they shed a little light on the bullish price of gold bullion. With inflation rising, the price of the US dollar drops. In turn, gold - which is closely tied to the US dollar - becomes far more affordable, as do other related luxury markets such as tourism. If the dollar continues to fall amid inflation, gold will continue to rise in the absence of an interest rate lift.

The growth of related markets

Inflation is being driven up by increased employment, and generally speaking there is more money in the US right now. The result is growth in related markets, paired with increased global international connectivity. More people are able to purchase items more of the time, and in increased numbers. Retail consultants McKinsey have predicted a global growth in the jewellery market to $250bn by 2020, up from current sales of $148bn. This results in increased demand for gold, and particularly good quality gold as people have more income to spend. 

Gold is one of the oldest traded metals in the world, creating the foundations of many currency systems globally. Still today it creates a wonderful part of the portfolio of many canny investors.

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