Since the FDR, the first 100 days of the presidential president are seen as a benchmark for achievements. President Donald Trump’s second term is bringing a tornado of change.
Whether you hate what is happening in Washington (or perhaps some of each), there are financial opportunities that you can use for your benefit, if you know where to see.
Unstable market
The market started the year on or with the all-time high, and it would be a wise to say that the new tariff has caused some additional instability, although most investors are still in a much better position than 12 months ago.
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However, it is important to note that the last two years (2023 and 2024) gave us more than 20% increase every year. This is not very often (last time in the late 1990s dot-com bubble), and some analysts have predicted that we were overwhelmed for an accident for more than a year.
Whether the current administration has to blame or not, it is said that “buy less, sell high” should still be applicable. Even though there have been some disadvantages in the last few months, it may not be a great idea to invest too much in the market when it is still near the high level of all time. Investors can take their cue from Warren Buffett, who currently have more than 50% assets of Berkshire in cash.
Interest rates
Today is a great opportunity to lock interest rates on fixed/guaranteed accounts (think Treasury, CD or fixed annuity), which are still paying more than almost any time in the last 25 years.
With the markets being so unstable, this can be a good time to move from high stock exposure to cash or equivalent.
Trump clarified that he would soon prefer to demolish interest rates, so that hostage can become more affordable (and to encourage business growth).
So investors should take advantage of today’s high interest rates for money on deposits and perhaps a little waiting, if possible before purchasing the house, if the interest rates continue to fall in the next few months.
Shifting the winds on ESG
Recently obtaining a lot of presses is an ESG, or environment, social and governance as an investment principle.
Trump certainly has no friend for climate change activism policies (to indicate many of their first executive orders), resulting in a lot to dry for environmental programs.
Profit and non-profit organizations in the environment and related fields historically received most of their money from the government.
In short term, this loss of funding will create chaos in the industry and some companies can be excluded from business, which are capable of securing alternative funding from grassroots donation or high-rolling elite donors should have a more durable financial future without being dependent on the government.
Over the next few years, it is probably a risky step to invest in these areas.
Tax cuts are ending or not?
The biggest financial question coming in the 2024 election was the possible expansion of Trump tax cuts.
The provisions of most Tax Cuts and Jobs Act (TCJA) of 2017 are scheduled to end in 2026, which means individual tax rates will increase, and many pass-through businesses, such as LLCs, will lose 20% flat cuts. (In particular, the C Corporation tax rates were permanently reduced to 21%, so this provision would not end in 2026.)
Depending on the calculation of inflation, Estate Tax exclusion is scheduled for a decline in $ 7 million per person in 2026. It is currently $ 13.99 million for individuals.
The Trump administration gave these provisions a top priority, and it is very likely that some kind of bill will be passed later this year.
However, the details are still very vague. For several provisions to be included in “a large, beautiful bill”, due to adding debt and several provisions of Trump, compromise will have to be compromised.
The most controversial provision will probably be salt (state and local tax) deduction, which is now limited to $ 10,000 and mainly affects rich taxpayers in high-tax states.
Trump wants to increase or eliminate this hat, but the cap is a large part paid for the original tax deduction in the first place.
What can you do?
So, what can investors do with all this information? It is probably safe to assume that at least individual tax rates are increased, for at least a few years.
However, most experts agree that the tax rates in general will eventually go up. If you have sufficient amount in IRA or 401 (K) schemes, the sooner you can transfer those people to a tax-free situation (by converting to Roth or by converting to permanent life insurance). It is better to pay slightly more taxes now (on conversions).
Most investors should spread conversions over many years, to “fill” the current tax without popping in the next bracket.
Relating the myth that “I will be in a low tax bracket when I retire.” If you want the same or better lifestyle in retirement, as you work, you will probably be in the same or high tax bracket in retirement, unless you have done the appropriate work to convert your tax-defard assets into tax-free.
conclusion
Do not allow short -term changes in Washington. Political winds come and go, and your long -term plan should be relatively unaffected, as long as you keep your eyes open and jump on occasions as they arise.
Take advantage of today’s high-onion-rate environment, which can be away from unstable equity that can still be near the high levels of all time. Reduce future taxation by converting to Roth or other tax-free buckets. But do not allow fear or uncertainty to affect you to consume or make your decision making.
By focusing on reducing or eliminating the three largest killers in retirement/investment scheme (risk, fees and taxes), you can establish yourself for long financial success, regardless of who you are in charge in Washington.
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This article presents the ideas of our contributing advisor, not by Kiplinger editorial staff. You can check advisory records with Second Or with Finara,
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