For this first Money Monday of the year, you are here to point out some stories to watch in 2017, correct?
Mellody: That is correct! While I don’t have a crystal ball, it is clear there are some stories that we know we will need to keep an eye on this year. Each of them will impact the U.S. economy, the markets, and therefore, they have the potential to impact our wallets and our financial health. I want to highlight them this morning, so our listeners can follow them as they emerge.
Let’s start off with the story most likely to have an impact on our finances.
The story that is certain to have an impact on everyone’s finances is interest rates. We touched on this just a few weeks ago when the Federal Reserve’s open markets committee raised rates slightly in December. This rate increase means that everything from mortgage rates to auto loans to credit card interest rates will rise for Americans. In 2017, the Federal Reserve is expected to continue pushing interest rates higher so long as the economy continues to grow and unemployment remains very low. Some are saying that the Fed could raise rates as many as three times. Barring unexpected events, it is likely that Americans will pay more in interest in 2017.
Good to know. There has been a lot of news lately about the Affordable Care Act. How could that affect our pocketbooks?
One possibility that could have a dramatic effect on millions of people across the country is the fate of the Affordable Care Act, or Obamacare. President Obama’s signature healthcare law has driven the uninsured rate to the lowest level in history, – from 16% to 8.6%, the first time it has ever been below 9% – and provides significant subsidies that make it possible for low-income Americans to get healthcare coverage. However, with the change of administration coming on January 20, all of that is in peril. President-elect Trump has said that one of the first priorities for him and the Republican congress is the repeal of the Affordable Care Act, even though they have no plan to replace it. Such an action would see many Americans return to the ranks of the uninsured, meaning that they will be burdened by every health care cost they incur, and those who do get subsidized now may end up paying much more. That will certainly hit people in their pocketbook.
What should we expect on the stock market front? How will 2017 play out for our retirement accounts?
It is always a fool’s errand to pick market performance, but based upon what we have seen over the past few years, the economy is on firm ground and companies are in good shape, with many of them being optimistic about possible corporate tax cuts and a less burdensome regulatory environment. However, with the new administration, uncertainty is the name of the game, and you know how the markets feel about that word. However, if you keep contributing to your accounts and investing for the long term, you will be fine. And remember, when an emergency or crisis hits, don’t do something, stand there.
Are there any other items you would point out as we look ahead for this year?
There are two other possibilities that I would point out. First, taxes are likely to change for many Americans if the Republicans enact Trump’s tax proposals. The President-elect plan would modestly cut income taxes for most middle-class Americans. But for nearly 8 million families — including most single-parent households — the opposite would occur: they’d pay more. Additionally, most married couples with three or more children would also pay more, an analysis by the nonpartisan Tax Policy Center found. And while middle-class families as a whole would receive tax cuts of about 2 percent, it’s nothing in comparison to the cuts for the top 1% of earners, who would average tax reductions of 13.5 percent.
I am also watching product costs that could rise for consumers as a result of Trump’s trade proposals. If he does enact higher tariffs or import taxes, those costs are likely to be passed on to you, the consumer. So that television that was made overseas and cost $250 dollars could now cost $335 if he imposes a 35% import tax. Any hike in import tax or tariffs could costs consumers more money.
Great to have some awareness of issues that might arise in 2017.