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WILL A NEW FED CHAIR AFFECT YOUR ASSETS AND INVESTMENTS?

December 11, 2017

WILL A NEW FED CHAIR AFFECT YOUR ASSETS AND INVESTMENTS?

 

President Donald Trump’s nomination of Jerome Powell as Chairman of the Federal Reserve didn’t exactly shake the financial world, with a Washington Post headline quoting an analyst as saying Powell would largely be “more of the same” from the Fed.

 

Powell, an attorney viewed as a consensus builder who is the first non-economist nominated to chair the Fed in decades, has been a member of the Fed’s Board of Governors since 2012 that has kept interest rates relatively stable over the past several years. He is considered a “regulation-cautious” Republican who is not expected to change the direction of the Fed much from the policies of the Board under current Chair Janet Yellen, an Obama-era nominee.

 

The Fed under Yellen is expected to raise rates in December, although by how much is not yet clear.

 

But how could Powell’s as fed chair affect your investments?

 

Investors should consult their financial advisor to discuss the in’s and outs of Fed policies and their effects on assets. Adam Ausloos can guide you through the process and help you pursue your financial objecives. Contact Adam Ausloos, MBA, CRPC at 414-269-2600, adam@defernow.com or visit www.DeferNow.com to learn more about how tax reform can affect you.

 

Powell is viewed as a “centrist” who does not make many public statements during debate. But he is also a proponent of raising interest rates while inflation is weak and the job market is strong. As he was quoted in The New York Times: “If the economy performs as expected, I would view it appropriate to gradually raise rates.”

 

There are a number of implications to new Fed leadership. Interest rates affect the broader markets, so there could be affects to investments and bonds if the Fed under Powell raises interest rates. 

 

In addition, changes in interest rates could affect property owners who have variable rates. This could be another reason to want to sell high and liquidate into a trust rather than trade into a new property.

 

Two options to protect assets are the Deferred Sales Trust and the 1031 Exchange. A DST is a legal agreement in which real estate, personal property businesses are placed in the Deferred Sales Trust. The DST agrees to exchange the assets for a contractual promise to pay a certain amount over a predetermined period of time.

 

The 1031 Exchange, also known as a like-kind exchange, is a transaction allowing for disposal of assets and the acquisition of others without generating tax liabilities from the sale of the first asset.

 

Either offers tax advantages that clients can avail themselves to in order to protect themselves and their assets from whatever changes the Fed may bring.

 

Meanwhile, Powell is expected to be confirmed by the U.S. Senate, so it will be important to watch how he steers monetary policy over the next few years, especially if the economy hits head winds.

 

But the overall effect is simple if the fed hikes rates further than the expected .25% increase in December is that everyone will pay more for borrowed money.

 

For now, the Powell nomination likely has support across the political spectrum. According to the Atlantic magazine, the fed has continued its policy of slow, cautious interest hikes, which has made some Republicans critical. Indeed, the publication said a Powell-led fed could bode well for the ongoing market rally. https://www.theatlantic.com/business/archive/2017/11/who-is-jerome-powell-fed-chair/544742/

 

Investors should always consult their financial advisor to discuss the in’s and outs of the effects of Fed actions and the advantages of DSTs versus 1031 Exchanges to protect assets and help you pursue your goals. Adam Ausloos can guide you through the process and help to both protect and enhance your assets. Contact Adam Ausloos, MBA, CRPC at 414-269-2600, adam@defernow.com or visit www.DeferNow.com to learn more about the individual advantages of DSTs.

 

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