Bonus: Financial State of the Union 2018

What a whirlwind 2018 was financially and otherwise. Are the years starting to blend together? I can’t believe it is 2019. A lot has happened this year economically that may make a difference in the way you invest and think about money. Today, I’m going to be breaking down the top financial stories from 2018:

  1. The Dow Jones Hit a Record!

    1. The Dow Jones Industrial Average hit a closing record of 26,828.39 set on October 3, 2018. It is the highest closing record since 1929. What does this mean?

      Money Therapy’s Take: This caused a lot of chaos, especially the latter part of 2018. The dow has taken a few plunges at the end of 2018 leaving individual investors scratching their heads on what their strategy should be in the new year. We all remember 2008 and do not want to mimic such a drastic downfall. In times like these, look at your allocation to ensure you’re still in line with your goals.

  2. Tax Cuts Implemented

    1. The Tax Cuts and Jobs Act (TCJA), although passed in 2017, was effective January 1, 2018. This is the most significant tax cut to low and middle-income American people since 1986. The tax reform cut taxes from all income brackets show by the graph below.

      Money Therapy’s Take: There’s no way around this, tax cuts are always a great idea. The TCJA was a great success for the American people who now have more money in their pocket than the previous 30 years. Viewgraph below to see what percent reduction in federal taxes will be enacted for 2018.

3. First Trillion Dollar Company

  1. Apple becomes the first trillion-dollar public company in the world. The company, founded in 1976, surpassed Amazon and Alphabet. Under CEO Tim Cook’s leadership, the stock price has increased roughly 2,000% since 2009.

    Money Therapy’s Take: Although this is an exciting time for Apple, we are unsure if they will continue to be innovative in the future. Rumor has it they are spending research and development funds on autonomous vehicles, augmented reality glasses, and maybe even video games. As for me, I will stick to my iPhone 6s because it just still works!

4. Bye Bye unemployment

  1. Unemployment hit a 49-year low in 2018. The unemployment rate was 3.7% in September. The creation of jobs is primarily due to the announcement of tax cuts from the Tax Cuts and Jobs Act.

    Money Therapy’s Take: Anyone that wants a job, had a job in 2018. Some employers have more jobs available than they had bodies to fill it. The corporations have more money, and more money available means more positions that can be filled.

5. No More NAFTA

  1. The North American Free Trade Agreement was established in 1994 and replaced by the USMCA or the United States-Mexic0-Canada Agreement. The new agreement is fairer to U.S. farmers, automakers, and the sick who were primarily impacted by this agreement. NAFTA was a controversial bill from the very start that finally has a new solution.

    Money Therapy’s Take: NAFTA was a poorly drafted bill that had some horrific outcomes. It created a system where Americans were paying unjust amounts while Canada and Mexico reap the rewards. During this time, U.S. lost jobs by the hundreds of thousands and U.S. wages became suppressed. There was a loss of 80% jobs in manufacturing alone and wages cut by 50%. Hopefully, the USMCA will allow individual Americans to play on a more even field.

6. Federal Reserve Issues Rate Hikes

  1. Due to strong economic growth, the Federal Reserve announced that it was going to be raising rates. The Federal Open Market Committee (FOMC), the arm that decides the interest rates, ended the year with a 2.5% interest rate. An increase in interest rate affects the entire economy. What does it do? Make borrowing money costlier.

    Money Therapy’s Take: The Fed is too aggressive in raising rates, and this is a mistake for our economy. The Fed believes the U.S. economy is stronger than it is and wants to take advantage of it. We are just now seeing economic growth that we have not seen in years and by making borrowing/lending more expensive, we may see a slowdown.

Final Thoughts:

2018 was an unprecedented financial year for the economy. We have not seen growth like this in years and previously believed that we would never see this again. Although there were such positive moves in the economic laws and markets, we are seeing a lot of uncertainty looking forward to 2019 mainly due to the rate hikes. My advice is to be aggressive during uncertain times, cautious during high times, and always check your investment allocation. You cannot control what happens in the economy or the government, but you can control your investment allocation and mindset. Make 2019 the year you learn more about your money so you can make more informed financial decisions.