The same people who march in the streets against our President could be the ones benefiting the most if they have a 401(k) plan invested in stocks at their job.
Since the election, the market has grown, year over year, 25 percent, the through biggest since 1936, according to a recent Goldman Sachs report.
The highest, year over year, at 38 percent, came during the presidency of Ronald Reagan, followed by Bill Clinton at 30 percent and John F. Kennedy at 27 percent.
What did Ronald, John and now Donald have in common? They believed in supply-side economics.
Supply-side economics works simply as the opposite of demand-side economics. In simple form, if you create tax incentives for businesses that will increase supply. Then, as the theory goes, give people an individual tax cut and they will increase demand to buy the supply.
While economists have been having a supply-side debate, for some 50 years now, there is no doubting the information above. And since Wall Street helps to dictate the market, obviously businesses love incentives.
In simple terms, the current proposed tax bill by the GOP Congress will give individuals a 15 percent tax cut while giving businesses up to a 60 percent tax cut.
The one BIG difference between the three however is that the current tax bill also eliminates more than 90 percent of all tax deductions and credits on both, the individual & business side. After all, this is why they say you can do your taxes on a postcard because there is nothing to deduct.
Therefore, we believe many middle class taxpayers, after offsetting the loss of personal deductions from their tax cut, will actually see an increase in their taxes
So, if implemented, this could increase demand a bit but it will increase supply two times more. If we do not grow more as an economy by June of 2018, should the plan be implemented it will slow down economic growth.
If President Trump gets his way with his nomination of The Federal Reserve chair, Jay Powell, then interest rates might go higher.
Slower growth and higher interest rates are a recipe for economic disaster in 2019. Supple-side economics, in the eyes of Kennedy and Reagan never meant slower growth and higher interest rates.
Enjoy your 25 percent now, and consider a conversation with your financial advisor. Bumpy roads, going downhill, will truly happen, if the Tax Reform Plan proposal gets passed by the end of this year.
Anthony Rivieccio is the founder and CEO of The Financial Advisors Group, celebrating its 20th year as a fee-only financial planning firm specializing in solving financial problems.