The House-Senate Conference Committee finalized an agreement on 12/15 on Tax Reform measures the White House is expected to sign before Christmas. Reform will reduce the income taxes on the vast majority of Americans. It further doubles the estate tax exemption to $10 million (indexed for inflation), essentially keeping up with the stock market’s rise since the exemption rose to $5 million in 2011. This increase sunsets in 2025 and planning will continue to involve creating exempt wealth, free of the wealth transfer tax system.
As expected the Fed has raised short term rates 0.25% and four more hikes are anticipated in 2018. Tax reform is anticipated to be a tailwind increasing GDP and inflation, with most confident the yield curve will maintain a healthy relationship. Raising rates too much or too fast can lead to a recession with an inverted curve as a signal, while a steepening curve may indicate the Fed is raising rates too slowly. As of now many feel we are in a “sweet spot!”