Things to Watch in 2017

Here we are at the beginning of 2017, a year that is sure to be filled with many changes. We expect certain themes for the year to emerge quickly and would like to share with you four themes to look for in 2017.

On the economic front, we can expect to see a theme of a slightly rising interest rate environment. Rates have been at historic lows for a long, long time. Longer than anyone expected. We have seen two small rate increases in the past two years, and should expect to see more this year with a Trump presidency having set in motion some inflationary forces. A little bit of inflation is a good thing, with the Federal Reserve targeting between 2.0% and 2.5%, but we have been well below that for some time. Positively, this is expected to increase this year and will in turn affect interest rates, increasing them at the fastest pace in almost a decade. The Fed is forecasting three rate increases. However, in 2016 they forecasted four and only delivered one. We are personally preparing for two rate increases in 2017.

On the policy front, we can expect to see some measure of tax relief in 2017. We are not sure who will benefit the most from these changes, but we have been promised by the Trump administration corporate tax relief and tax relief for middle income earners. This could be a good thing. But, at this point all we have to go on are the promises that have been made. Expectations may be a little too high with regard to tax reform. With current corporate tax rates at 35% and President Trump promising 15%, it might be wise to prepare for something in the middle – maybe 25%. Personal rates may also be revised, but it will be difficult to accomplish the three-tier personal tax rates that Trump has proposed. Bipartisan tax reform will be difficult, at best, impossible at worst – so we are diluting Trump’s campaign promises to more realistic numbers. Prepare for gridlock or congestion in Washington, but hope for consensus.

On the technological front, we expect to see faster mind boggling technological advances in 2017. Virtual Reality is expected to continue to be in the forefront of the tech world as major companies continue to improve the technology. Watch for a battle between the major tech powers over who will dominate this developing marketplace, both in software and hardware. More things to look for: self-driving cars, an increasing number of cyber-security threats, and the rise of Snapchat as a top competitor in the social media realm.

On the social front, we expect to continue to find terror prevention as a central topic of discussion in 2017. Unfortunately, there were an increasing number of lone-wolf terrorist attacks in the U.S. in 2016, and there are no obvious signs to expect a reversal of this trend. We are still waiting for a political or social leader with the ability to bring people together in a unified response against terrorism. Globally and domestically, we are often seeing the opposite, fierce political divides over this very issue resulting in powerful nationalistic voices. Nationalism is a cry to put one’s own country first. It is a rejection of a globalist attitude and a withdrawal in the level of trust and control that countries are willing to extend to one another. We saw this as Brexit unfolded in the early summer of 2016. We saw it again in the election of Donald Trump.

What should one do in light of these expectations for 2017?

  1. Be cautious with your money. A recession will come in the future. It may not be this year or the next, but it is extremely important to store up during good years in preparation for the bad. Make decisions that will prepare you for potential upcoming difficult times. Make hay while the sun is shining, because you can bet that it will rain again, eventually. Open a rainy day fund with a few months’ worth of income in it.
  1. Pay attention to what is happening in Washington. There have been a lot of promises made by a new administration. Keep your ear low to the ground and learn to distinguish what is possible and what is unrealistic so that you can react accordingly. Stay nimble, because expectations and policy can change with a single tweet.
  1. Continue to practice caution with your sensitive personal information over technology. People are trying to steal from you at every opportunity. Use complicated passwords and have a system to change them regularly. Be wise and watchful.
  1. Always keep a cash reserve for the unexpected. No matter how good the economy may be doing and no matter how unlikely negative events may seem, cash is always king.

We are always here to help you with personalized financial advice. We specialize in tailoring suggestions for your particular situation. Contact a branch near you with your next financial question.