Author: colonyfamily

Growing uncertainty around the impact of tariffs, immigration, government spending, and the ongoing war in Ukraine is set to test what has been a very resilient US economy. Indeed, there have been signs of slowing in recent months, but it is to be expected given the lagged effects of monetary policy tightening. Following a strong year for financial markets in 2024, the backdrop has shifted thus far in 2025. Not surprisingly, recession fears have resurfaced.

For further details please see the link here: CFO Brief Investment Commentary (April 2025)

If you have any questions or would like to discuss further, please don’t hesitate to reach out.

The global stock market rally continued in 2024 against a backdrop of continued global economic expansion and moderating inflation.  Most asset categories exhibited positive calendar year returns, though the rise in Treasury bond yields and strong US dollar created a headwind in the fourth quarter.  While the economic backdrop should remain supportive of corporate profits, positive surprises may be more difficult going forward with so much good news already priced in.  In terms of portfolio positioning, we remain underweight to US large cap stocks where valuations are stretched and earnings expectations are high.  However, we are targeting an overweight position in small cap stocks that appear attractively priced and could benefit from structural shifts in the economy, like deglobalization and reshoring.  We also recommend taking advantage of more attractive yields across fixed income sectors.

For further details please see the link here: CFO Market Backdrop and Outlook (January 2025)

If you have any questions or would like to discuss further, please don’t hesitate to reach out.

Tax Legislation
With recent Republican victories in the U.S. presidential, Senate, and House races, significant tax policy changes are expected in 2025, particularly regarding provisions of the Tax Cuts and Jobs Act of 2017 (TCJA), many of which are scheduled to expire on December 31, 2025. While Republican control of both the House and Senate provides a pathway for legislative action, tax changes will require either 60 Senate votes or passage through the budget reconciliation process. The reconciliation process allows budget-focused legislation to pass with a simple majority but imposes limits on measures that increase deficits.

Key tax policies under consideration include making TCJA provisions permanent, addressing individual income tax rates (set to revert to a top rate of 39.6% after 2025), and extending the Qualified Business Income (QBI) deduction under Section 199A as well as the expanded estate tax exemption. There also has been some discussion about potentially restoring the state and local tax (SALT) deduction without the current $10,000 cap.

Inflation Adjustments
In October, the IRS released inflation-adjusted figures for different components of the Internal Revenue Code. These adjustments apply to tax brackets, phaseouts, contribution limits and various other items for 2025. This memorandum highlights many of these items as we draw closer to the 2025 tax year.

Considering the interest rate cuts in 2024, reduced inflation, and ongoing market volatility, strategic tax planning remains critical for individuals aiming to optimize cash flow and minimize tax liabilities in 2025. It is essential to stay informed about tax law changes implemented during the transition from 2024 to 2025 and assess their potential impact on your financial and taxable situation. Proactive evaluation and adjustments can help ensure that your financial strategies align with the evolving tax landscape.

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We are reaching out with our latest market review and investment outlook commentary. The linked file includes a review of recent financial market results, our assessment of the macro backdrop, and an update on portfolio strategy. The piece also includes a discussion of the current level of concentration in the US equity market.  Here’s an overview:

• The global stock market rally has continued thus far in 2024, though the recent bout of volatility serves as a reminder how quickly sentiment can shift.  As a result of continued leadership from mega-cap technology stocks, the US equity market is the most concentrated it’s been in decades.
• The US economy has been more resilient than economists expected.  In contrast to previous Fed tightening episodes, households and the corporate sector have been protected from Fed rate hikes by locking in low rates on 30-year mortgages and longer-term corporate bonds.
• However, the treasury yield curve remains inverted, the lagged effects of monetary policy tightening are starting to show, and the economic outlook is uncertain.  We think the odds favor a continuation of the current economic cycle, but at a slower pace of growth—while acknowledging that the Fed’s historical track record of achieving a so-called “soft landing” is spotty at best.
• In terms of portfolio strategy, we recommend minor tilts away from an appropriate strategic asset mix and a readiness to take advantage of opportunities that may arise.  Tactically, we maintain an underweight position in US large cap stocks while emphasizing reasonably priced high-quality stocks.  In our view, heightened valuations and greater concentration pose a risk.  We recommend leaning into small cap stocks that are trading at more attractive valuations.  We also remain fully invested in in core/investment grade fixed income given that yields are near the highest levels in 15 years.

Click here to read the full commentary.

After the broad-based downturn in 2022, most asset categories rebounded in 2023 against a backdrop of continued economic expansion and moderating inflation.  Global stock and bond markets experienced a strong year-end rally as the US Fed signaled a potential shift to monetary easing.  Yet, positive surprises for the economy, disinflation, and Fed rate cuts may be more difficult going forward with so much good news already priced in.  While both the economy and financial markets begin 2024 with favorable momentum, we believe some caution is still warranted.  In terms of tactical portfolio positioning, we remain underweight to US large cap stocks where valuations are stretched and perhaps reflect an overly optimistic outlook for near-term earnings growth.  We recommend taking advantage of more attractive yields across fixed income sectors.

For further details please see the link here: CFO Market Backdrop and Outlook (Feb 2024)

If you have any questions or would like to discuss further, please don’t hesitate to reach out.

Tax Legislation
A politically divided Congress struggled to pass any form of meaningful legislation in 2023. There had been some discussion around extending or modifying certain expiring tax provisions of the Tax Cuts and Jobs Act (TCJA). Expiring TCJA provisions were not the only tax items gathering some movement. Congress had also been discussing multiple tax changes during the year, but the bills were unable to garnish enough support to make their way through committees to the floor for a vote.

Inflation Adjustments
In November, the IRS released inflation-adjusted figures for different components of the Internal Revenue Code. These adjustments apply to tax brackets, phaseouts, contribution limits and various other items for 2024. This memorandum highlights many of these items as we draw closer to the 2024 tax year.

Considering interest rate increases during 2023, the persistence of inflation, and increased market volatility, strategic tax planning remains paramount for individuals seeking to optimize cash flow while minimizing their tax liabilities. It is imperative to be aware of changes from 2023 to 2024 and evaluate for any potential impact on your taxable situation.

Click here to read more