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Yahoo
28-05-2025
- Business
- Yahoo
Advisors Weigh In on Trump's ‘Big, Beautiful' Bill
At more than 1,000 pages long, President Trump's tax cut bill is certainly big … but beauty may be in the eye of the beholder. Passed by the House last week, the proposed legislation now heads to the Senate, leaving financial advisors in a holding pattern as they assess the potential impacts. While some tax saving aspects could benefit clients, advisors said other provisions could negatively impact the economy at large. What we do know is the bill is far from finalized. 'To make any drastic portfolio changes based on a bill that struggled to make it out of the House is at best a risky trade, and at worst a speculative gamble,' said Sean Dann, director of investment research at Marshall Financial. This story was originally published on The Daily Upside. To receive financial advisor news, market insights, and practice management essentials, subscribe to our free Advisor Upside newsletter. The Congressional Budget Office projects the bill may add $3.8 trillion to the national deficit over the next decade — a key concern for the bond market. As of Friday, yields on 20- and 30-year Treasurys were trading above 5%, signaling growing investor concern over US debt. That market pressure could force policymakers to pull back spending, similar to the bond vigilantes of the Clinton era, said Mark Heppenstall, CIO at Penn Mutual Asset Management. 'The higher interest rates go, the less opportunity we have to fund things like tax cuts,' he said. 'Eventually, the costs become too burdensome.' But it's not just the tax bill driving up yields. Inflation, tariff uncertainty, and Moody's recent downgrade of the US credit rating are also contributing, Heppenstall said. 'The whole idea of US exceptionalism is beginning to unwind, and we're seeing a lot of stock and bond markets outperform US assets.' Please, Pass the SALT. Another major highlight for clients is the increase in the state and local tax (SALT) deduction. Highlights from the proposal include: Raising the cap from $10,000 to $40,000, which would primarily benefit residents in high-tax states like New York and California, advisors said. A proposed increase in the estate and gift tax exemption would raise it from $5 million to $15 million in 2026. 'Having a solid number to plan with helps a lot of high-net-worth individuals plan for their heirs more efficiently,' said Matthew Saneholtz, CIO at Tobias Financial Advisors. A novel program in the bill is the Money Accounts for Growth and Advancement, or MAGA accounts, which would provide children trusts seeded with $1,000 from the federal government. Parents could contribute up to $5,000 per year, which will then be invested in US stocks. The funds can go toward expenses, including college tuition, small business loans, and first-time home purchases. The accounts' eventual value will depend on how they stack up against more traditional savings vehicles like Roth IRAs, 529 plans, and Uniform Transfers to Minors Act accounts, said Catherine Valega, a CFP with Green Bee Advisory. 'Poor families will likely find themselves unable to add any funds themselves,' she said. 'This will benefit mostly the wealthy who already have enough options.' The post Advisors Weigh In on Trump's 'Big, Beautiful' Bill appeared first on The Daily Upside.
Yahoo
06-04-2025
- Business
- Yahoo
Advisors navigate a political divide in client outlooks
Financial advisors often advise keeping politics out of a portfolio, but do clients heed their warnings? A flood of new tariff policies from the Trump administration has sent shockwaves through the stock market. Advisors say that individual reactions, often dependent on their political views, can vary wildly from one client to another. Paula Nangle, president and senior wealth advisor at Marshall Financial in Doylestown, Pennsylvania, said market outlooks between her conservative and progressive clients can be quite different. READ MORE: Proactive comms can keep jittery clients from blowing up inboxes during market turns Following Donald Trump's inauguration earlier this year, one of Nangle's clients asked her if she could put all of her money into a "virtual mattress," she said. Nangle's conservative clients, meanwhile, have been "quite bullish" since the start of the second Trump administration, she said. That pattern is hardly new. Researchers have found that investors tend to be more optimistic when their favored political party is in power, viewing markets as less risky and more undervalued. As a result, investors whose political party is in power allocate more to risky assets. The inverse is also true. Midway through President Trump's first term, just 16% of Democrats said that the stock market would be higher a year from then, according to a poll conducted in December 2018 by Axios and SurveyMonkey. In that same survey, more than three times as many Republicans — 51% — said the stock market would be higher by the end of 2019. READ MORE: Uncertainty drives sharp decline in advisor confidence Partisan views on the stock market can have substantive impacts on individual investments. Da Ke, an assistant professor of finance at the Darla Moore School of Business at the University of South Carolina, found that even after accounting for factors like education, income and wealth, Democrats are less likely than Republicans to invest in the stock market. Financial advisors are seeing those partisan market views firsthand. Ethan Miller, founder of Planning for Progress in Washington, D.C., said that his more politically progressive clients have been pessimistic about the future of the economy as a result of the new Trump administration. "I had a client come to me recently and say, 'Oh, should we consider pulling out our money or investing more conservatively?'" he said. "And I pointed out that we were already invested what I would consider to be rather conservatively, based on our previous conversations … and they were like, 'Oh, okay, great!'" READ MORE: Crafting the perfect retirement portfolio: A financial advisor's dilemma Miller, whose firm serves left-leaning clients as a niche, said that his clients' pessimistic political outlooks shouldn't impact their long-term investment strategies. Other advisors take a similar approach. Ross Dugas, founder of registered investment advisor Scientific Financial in Houston, said market impacts from President Trump's recent tariffs have concerned some of his clients, but he reminds them that they're planning for longer time frames than any single administration. "We're looking at 10-, 20-, 30-year time frames many times, and what's happening today is usually not terribly relevant amongst really long time frames like that," Dugas said. "The market has always gone up and down, but it's also sort of maintained this upward trajectory when you look at it over long time periods. So I encourage people to kind of zoom back and just look at the big picture, as opposed to just focusing on what's happening today." Still, for clients worried about the state of the market, Dugas said there are a couple of actions advisors can take to help their clients without altering broader investment plans — namely, Roth conversions and withdrawal strategy shifts. "Roth conversions can become a little more attractive in down markets because we're essentially going from stocks and bonds to stocks and bonds, and we're just changing from a traditional IRA into a Roth IRA," he said. "So if we move $50,000 from account A to account B, we haven't lost any value. But if the market is down when we do that transaction, we're able to move more shares … into that Roth IRA, that more tax-advantaged account, potentially faster without as big of a tax impact." A down market is also a good time to reevaluate withdrawal strategies for retired clients, Dugas said. For retirees with buckets of both stocks and cash, now could be a good time to lean more heavily on their cash reserves so they're not liquidating positions in a correction. When played right, advisors say that market downturns can be full of opportunity for clients, especially those in the accumulation phase. READ MORE: Tariffs, taxes and market tumult: Navigating uncertain, volatile times "Like any market downturn, regardless of the cause, there are opportunities to … make a little bit of a silver lining out of what is, hopefully, a temporary downturn," Miller said. "What I always say to my progressive clients is, 'If the market never recovers, we have bigger problems than the balance in your 401(k), right?'" Miller said that strategies like Roth conversions don't make sense for his clients at this point, but the current correction does present a useful opportunity for other options, like tax-loss harvesting. Still, for all the unique opportunities the current market presents to investors, advisors say that client concerns aren't going away anytime soon. "We're certainly not at the end of this, right? We're not going back to the normal market cycle tomorrow," Miller said. "I anticipate having many more conversations as we get deeper and deeper into not just correction territory, but actually maybe bear market territory. I certainly am anticipating more of those conversations." Sign in to access your portfolio
