Camelot Portfolios Talking Points

Senate Releases Tax Reform Plan

Senate Republicans revealed their tax reform proposal to the public on Thursday. The proposed bill shares a couple of features with the House’s tax plan. Both policies want to increase the standard deduction for individuals from $6,350 to $12,000, and $12,700 to $24,000 for married couples (US Senate Committee on Finance). The child tax credit is largely left intact as well, but deviates from the House bill in an increase from $1000 to $1650 (US Senate Committee on Finance). The House proposal calls for an increase to $1600. The other major similarities are the removal of the alternate minimum tax, doubling the exemption of the “Death” tax, and preserved retirement saving programs (US Senate Committee on Finance).

While each proposal shares many highlights, there are some structural differences between the two proposed bills. The Senate proposal keeps the same number of tax brackets with 7 tax brackets, while the House proposal would consolidate to 4 brackets (US Senate Committee on Finance). The mortgage interest rate deduction is left unchanged at $1 million (US Senate Committee on Finance). The other major divergence is keeping state and local tax deduction up to $10,000 (US Senate Committee on Finance).

Tax reform historically has taken from several months to years before it reaches the President’s desk.  Each proposal will likely be amended along the way before votes are even placed in each chamber. It may not be surprising to see if the bill attaches some sort of health care amendments. With midterms only a year away, Republican Congress men and women will be keen on passing this legislation.

Global Markets Highlights

Equity markets around the world have had an excellent year so far. As of November 14th, the domestic markets are up with the S&P 500 increasing 14.5%, and the Russell 2000 returning 7.6%. Using MSCI All Country World Index Ex-US as a proxy, developed equity markets have increased 23.76% year to date (Morningstar). Emerging markets have done exceptionally well up to this point with an increase of 32.81% year to date (Morningstar).

Looking into each continent, Asia, Europe and South America continue to increase in market value. The aggregate for Western Europe – the Euro Stoxx 50 index has increased 15.63% (Market Insider) year to date. In Asia, the Japanese market index, Nikkei 225, has increased 12.42% (Market Insider), and the Chinese Shanghai Composite index has increased 9.36%. In South America, the Brazilian Sao Paulo Stock Exchange Index has increased 17.6% (Bloomberg).

 Compiled by the Camelot Portfolios Investment Committee

Darren Munn, CFA, Chief Investment Officer

Paul Hoffmeister, Chief Economist

Eric Kartman, Research Analyst

Drew Steinman, CPA, Trader/Research

Zach Hartenburg, Trader/Analyst

Frank Echelmeyer, MBA, CKA®, Advisor Consultant

-for Broker/Dealer and RIA use only-

 

References

Bloomberg. "bovespa Brasil Sao Paulo Stock Exchange Index." November 2017. Bloomberg. 2017.

Market Insider. "World Index Map." November 2017. Markets Insider. 2017.

Morningstar. "MSCI ACWI Ex USA GR USD." 2017. Morningstar Direct. 2017.

US Senate Committee on Finance. "Tax Cuts & Jobs Act." November 2017. US Senate. 2017.

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