New Year, Same Economic Principles

In 2017, our economy experienced its second largest expansion since WWII. With a new year starting up, this booming economy will be put to the test. When considering our economy’s future performance, energy prices and taxes are a large factor in business and government decisions. By analyzing how their economies work, we are able to highlight the integral roles they both play in our larger economy. Furthermore, these economic data points help us pinpoint what stage the economy is in, which in turn helps us avoid bad investments and include sound ones in your portfolio.

When it comes to energy prices, people most frequently look at the price in dollars for a barrel of oil. There are many types of oil, but the two most popular are Brent Crude and West Texas Intermediate. Their prices in the short run are dictated by demand since oil is produced at a much slower pace than the rise and fall of demand for oil. Supply is determined mostly by the oil producers and can easily be altered by storing oil and keeping it out of the market. Oil-exporting organizations such as OPEC, however, has had a policy of limiting the supply of oil by cutting its production. Russia, along with other countries, has also been seen complying with the quotas set forth by OPEC. Since oil plays a vital role in the input of many companies, and even a major role in the stock market, their prices can have a large effect on oil companies, which we act upon by adding or removing oil company stock from your portfolio.

Another major component of the economy is taxes. As we all know, taxes can be expensive, which is why companies and people alike perform certain actions to save on their tax bill. Just recently, the GOP passed the Tax Cuts and Jobs Act of 2017, which is expected to drive a significant amount of overseas corporate profits back into the United States. These profits may come in the form of dividends back to shareholders or even in the form of money which companies can use as capital to purchase machinery and other resources. If these expectations are correct, it could further expand the economy as companies are investing more money domestically. In 2004, Bush’s Corporate Repatriation Tax Amnesty saw most of the money used for dividends and stock buyback programs. If companies behave in the same manner as they did in 2004, there is a good chance that large amounts of overseas cash will also go toward dividends and stock buybacks.

There is a wide variety of factors that can affect the economy and at Fogel Capital Management, we are constantly monitoring this information using our databases and systems to take the right steps with your money. In the New Year, we want you to be confident that there are experience and knowledge going behind your investment decisions. Call us at (772) 223-9686 for a free consultation today. We will be more than happy to offer you guidance regarding your investments.