January 23, 2018
There were several significant developments in 2017 that investors will need to consider when deciding how to invest and plan for the future. Here are the top 5:
1) President Donald J. Trump assumes office / policy impacts / passage of the tax overhaul: Reducing regulations was a big Trump campaign promise — and that has not changed. While his presidency has had its share of controversy, the stock market has hit record highs throughout the year — and passage of the tax overhaul in December is expected to have a large impact on many. Of course, specific details and effects will vary depending on your particular situation, but changes affect individual and corporate tax rates — the standard deduction has basically doubled, but the personal exemption has been eliminated. Regarding regulations, Trump is trying to slow new ones and reduce current ones — but repealing existing regulations is difficult to do and, regardless, there’s not much evidence that doing so substantially helps stock prices.
Also, market volatility could be a concern for 2018. Overall, it has been very low, but there has been a lot of money-trading volatility; if volatility suddenly spikes, that could accelerate a trend.
2) Foreign affairs: A war with North Korea could destabilize the Asia-Pacific region and create tension in consumer and investor confidence here. Also tied to tension over North Korea is the U.S. relationship with China. If the United States were to impose import tariffs on Chinese goods due to a real or perceived lack of cooperation by China in dealing with North Korea, China might in turn retaliate economically. Elsewhere, Iran and Saudi Arabia might possibly be on the brink of a proxy war over Lebanon, and the Israeli government and military establishment has said a Lebanon war is inevitable if Iran and Hezbollah establish a permanent presence in Syria.
3) Cyberattacks like the Equifax data breach that impacted as many as 145 million Americans: Overall, they have erased at least $52.4 billion from shares in recent years, damaging a firm’s brand and causing shares to fall on average 1.8 percent permanently, according to a report. Analysts and venture capital firms have started factoring cybersecurity preparation into the assessment of a company. Two-thirds of firms’ share prices are negatively affected after a cyberbreach, and financial firms are hurt the worst, with communications companies coming in second.
4) The environment and natural disasters: Major hurricanes (Irma, Maria and also Harvey, which dumped a record 50 inches of rain on the Houston area), climate change and global warming — the latest five-year period ending in March 2017 ranks as the warmest 122 years in historical recording-keeping for the continental United States. With a $3 billion hit from a string of natural disasters, Berkshire Hathaway looks like it’ll have its first annual insurance underwriting loss since 2002.
Add to this the late 2017 devastating California wildfires, and you see why an environmental summit in Paris in December of 50 world leaders revitalized a worldwide drive for businesses and governments to speed up decarbonization of the world’s economy. Climate Action 100+, a new initiative, features about 225 influential global investors with more than $26 trillion in assets under management, “pledging to engage with 100 corporates estimated to be responsible for about 85 percent of total global greenhouse gas emissions, so as to step up their ambition on climate action,” according to GreenBiz.
5) Innovation: Technology advancements are taking place in payment systems (Zelle), automated portfolios or robo-advisors, cryptocurrencies (bitcoin, etc.) and blockchain technology, the internet of things (IoT), 3-D printing, personal robots/virtual assistants like Alexa, self-driving cars (Google cars), virtual reality, yottabytes and zero email organizations. What will rise to the top and what won’t?
Other innovations are taking place in the health arena: Merging technology that can revolutionize the health care industry includes genomic editing, digital genetics, biomechatronics, synthetic neocortex (computer-based simulation of the cognitive component of the human brain), life extension labs, gene therapy, 3-D printing using stem cells, cloned organs, medical nanobots, biohacking, and smart tattoos (biosensitive inks that monitor health via changing colors).
Finally, there are innovations in space: The commercialization of space (SpaceX’s Commercial Crew program, Richard Branson’s Virgin Galactic) has opened a pathway to the stars for investors. While Space X and Galactic aren’t open to investors, there are several publicly traded companies and ETFs that have growing roles in this fledgling industry.
So, as 2018 begins, keep these developments in mind when creating your investment strategies. There is a lot of relevant, timely information here worthy of consideration, so don’t hesitate to investigate further with the help of an advisor.