Let's Talk Money

also a certified Financial planner an equity compensation analyst. Vinni is a wealth advisor with the firm and a key member of our tax team. Good morning, Vinni, and thank you for joining me.

is a holiday. Banks are closed, but markets are open, so Vinnie and I will be hard at work with the rest of our firm, but hopefully you'll get a chance to enjoy the long weekend. And if you're retired, hey, it's just another day off anyway.

hopefully everybody's safe in recovering. But certainly our thoughts and prayers are out there, and so you know, certainly, you know, in this area of the country, we are blessed in that you know, we're not being impacted by that kind of weather, but it is devastating to see all the areas, and you know many of us have fit friends or family members in that area, so it really does, you know, touch all of our life so so best wishes for all those you know, Vinny and I are here this

morning for the next hour with you. We want to hear from you, so we encourage listeners to call in with questions. You know, one thing we always say is there is no dumb question when it comes to your money. I guarantee if you've got that question, there's another listener out there who has that same question. So call in, ask us and we'll do our best to help you. You know, as advisors, we spend a lot of time

with our clients, you know, just answering questions. You know, certainly wealth management is a primary reason our clients come to us, but also our financial planning, tax planning, and a lot of time we spent doing what if scenarios, and it may be questions about major purchases or major life decisions, maybe moving to another state, and certainly we encourage those questions and it's an important part of what we do. So we're here to kind of share that

with you. And you know, Steve talks a lot about our team and the firm he's built. He's proud of it, you know, quite frankly, we're proud of it. And you know this week, we received another designation, you know, the all but any business reviewed as a survey and again we're selected as one of the best places to work. So not only is Steve proud of our firm, but I will say our associates are all proud, proud to be a part of it. And you know, we're proud

to get that distinct yet another year. So as Steve bench as a team is you know, we've now have nine cfps, four CPAs, one certified divorce financial Analyst, once certified certified Private wealth Advisor, and Vinny our equity compensation associate. And we have also an en Roll tax agent. So we have a lot of collective knowledge. We love to share that knowledge with a listening audience. So again appreciate you tuning in with this this morning. I hope you

enjoy the next sixty minutes or so. With that said, I encourage listeners to pick up the phone call in with questions. You can reach us at eight hundred talk WGY. That's eight hundred eight two five five nine four nine. So this morning we're going to cover a lot of topics. We're going to cover you know, the markets, investing, We're going to talk a little bit about some of this little thing called the election that's coming up pretty pretty soon,

and obviously whatever topics you call in with. So you know, we'll start off with a market update, and you know, just another strong week in the markets and just so great to see some of the results we're seeing. And you know, this week we saw more signs that the US economy is heading towards a soft landing. You know, we received some inflation news during the week. You know, not all of it was within expectations, but all of

it really directionally correct. We'll talk a little bit more about the CPI PPI prints, but overall, inflation heading in the right direction, definitely heading in the direction that the Fed wants to see it. So I got some inflation news, and you know, also kicked off the third quarter.

corporate earnings are on the forefront. As I mentioned, this week really started the Q three earnings season, so we'll hear a lot of companies reporting earn earnings for the Q three but also their guidance for Q four and beyond. So certainly, I think we're going to see markets driven by earnings and expectations, so we'll certainly have our eyes and ears on that. We also have two more FED

meetings coming up, a meeting in November in December. We all know the FED took a big swing for the fences, you know, with a fifty basis point decrease half a percentage point decrease in the FED funds rate in September, really setting the table for what's going to happen in November December. Certainly, you know, talked about some of the CPI, some of the inflation data. We'll talk a little bit

more detail about that. And this FED has been very clear they're going to be data driven in their decisions, so they took a big swing in September, and you know, we'll see what happens in November and December with their upcoming meetings. But certainly eyes on that, and as I mentioned, you know, the election hard to believe, it is only twenty four days away, and certainly you know markets will react to that, and well, Vinny and I can talk about that in really two segments. You know, you really

have you know how the markets are reacting. And there's certainly some big tax differences, and with Vinnie here being a major part of our tax team, we want to talk a little bit about that. But so certainly eyes on the election, and I will say not only eyes on the results, you know, whether it's a Democratic victory or Republican, but also the process.

of oils, we should certainly see some energy costs. So, you know, although we had a great first three quarters and you know, very positive week behind us, doesn't mean that we're without headwinds going forward. We're still very bullish on US equity markets. But obviously for all the things I've said, those are the things we're looking at as a firm. And so here we are, second week of October.

SMP up almost twenty two percent year to day, Nasdaq a little over twenty two percent year to day, the Dow up almost fourteen percent year to day, and the Russell two thousand small cap index up over you know, almost ten and a quarter percent. So, as I mentioned, you know, not only great breadth for this past week, but certainly.

econom economist expectations. And you know, other signs from that is unemployment coming down to four point one in wage growth into a wage growth of four percent, which is you know, we talked about that for what supportant is is we got inflation hovering in that two and a half range, but we got wage growth at four percent.

So certainly seeing from an economic perspective, jobs very positive data, very much the data that the FED wants to see. Now,

this past week we saw some inflation news. So CPI print came out on Thursday, and you know, as we get so close to the election and mentioned only twenty four days away, Yeah, this is one of the last major inflation reports that we're going to see before the election, and you know, the report shows that you know, inflation is cooling, but it is cooling a little slower than expected, and so the report showed Thursday's report showed the CPI rose at two point four percent year over year, and

that's very you know, that is a decline from August which was two point five percent, so a slight decline, but it was a little bit hotter than expectations. Expectations were about two point three percent, So a little bit hotter inflation than expected, but certainly nothing of concern there. And I will say annual core inflation, remember you know, core excludes some food and energy components, similarly came in, you know, a little bit hotter than expected, but very marginal, honest.

So overall, I say, even though it showed inflation a little bit hotter than expected, certainly not within a range that's going to cause concern with the Fed. And you know, interesting when you really parson into the data, to remember, the Feds really the inflation gage that they have their eye on the most is the PCE, the Personal Consumption Expenditure Price Index, and has a little bit different composition than the CPI, and in particularly it's got a little

bit lower exposure to housing costs. So certainly expectations are and I think, you know, we'll see the next print end of the month, so October thirty first we should see that, and the expectation is to see a little bit of cooling, you know, more than that two and a half percent range. So again inflation data CPI, nothing of concern there, and I think that's going to bode well for the Fed's next meeting.

You know, it is interesting because you know, we see all these positive reports showing inflation is coming down, but one thing we have to remember that these are all still you know, year over year increases, so the consumer is still saying, hey, I'm feeling the pain. I'm feeling the pain of increased prices. So I'm glad everybody's celebrating over here that the CPI print is lower. The PPI, but the fact is I want to see negative I

want to see prices coming down. So certainly consumer sentiment is still negative on inflation because prices are higher than they were a year ago, two years ago, four years ago, and you know, it's hard to see some components may come down, but there's other component, especially in the service side, where some of the increased costs, some of the increased wage costs are built in. You're just not going to

see that happen. And so consumers, although you know, we are seeing from an economic point of view, some inflation getting under control, you know, those are all year over year increase measures. So the consumer is saying, I'm still feeling the pain. And you know, certainly we're in a situation where certain income classes are certainly feeling the pain more than others. So so although things getting better, certainly

consumers still saying, you know, inflation is still here. From me, I'm paying more in the grocery store, I'm paying more for services than I want to be. So a lot of data coming out this week, and certainly data that the markets liked, and you know, I think from more Fed officials you hear it's data that the Fed officials liked as well, So again want to encourage listen, Vinnie and I here really for you to answer questions.

you know, cooling, but it's a little stickier than expected. Certainly, I think the odds are we're looking at at lower rate decreases, maybe in the twenty five basis point decrease and for maybe both the November and December. But certainly got the election occurring in there, a lot of things

have in the fourth quarter. But from a data perspective, you know, I don't think there's you know, we will get the FEDS you know, preferred inflation gauge before their next November meeting, But in terms of inflation numbers, you know, we're not going to see anything dramatically new, So the Fed's going to be working off the data at hand. You know, obviously we're heading into Q three earning season.

We'll talk a bit about that, but you know, so before when the FED meets early November, really the data you know we've seen today is what they're going to have at hand. Maybe a little bit more inflation data through the end of the month, but certainly the expectations are we're looking at a twenty five basis points. Markets are pricing that in and so certainly if you know where you're going to see market reaction is again market doesn't like surprises, so a surprise one way the other

could cause certainly some some impact. So you know, we're getting close to the the break, so I'm going to

save part of this conversation for after the break. But you know, we do have elections coming up, and one of the questions, you know, we get a lot of, you know, questions from our clients on is how is this going to how's the election going to impact impact me in my portfolio or other parts of my life, And so certainly that that's a question that we get asked a lot, and many of you listeners may have that, and you know, from a portfolio point of view, from

a market perspective, there's an answer, and then certainly you know there's a tax answer.

time analyzing. And really when you look at markets over a long historical period and you look at whether it's a Republican in house or Democrat president holding the house, that the markets which party holds off as really does not have a major impact on returns that the markets companies figure out how to operate, and sometimes it's counterintuitive. You know, you see a president who seems to be friendly towards energy and you expect the energy sector to increase and that doesn't always happen.

what the what the administration looks like. But from a portfolio construction point of view, really whether whether it's a Republican Democrat, you know, companies figure out how to adapt and generate earnings. I will say the one thing that you know could be a little concerning, it's just the process.

a number of factors. So certainly, if the election goes through a process where we don't have a clear winner or there's contesting of who the center is, you know, that may certainly cause some short term volatility and one that you know investors have to be aware of and you know, hopefully with all of the attention the election process is getting, hopefully, you know, we will be in

a position to have a smoother process. You know, when we come back from the break, you know, Vinnie's going to dive into really some of the tax differences of the you know, of what the Republican Party is looking at versus the Democrat and how that might impact you. So, you know, believe we are halfway through today's show and we're going to be taking a commercial break. I want to thank you for tuning in with us today. We hope you are enjoying the show. We're going to hope

you rejoin us after the break. Again, we're here for your question, so we encourage listeners to call in with questions. You can reach us at eight hundred talk WGI. That's eight hundred eight to five five nine four nine. You are listening to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health while we manage their wealth for life. Thank you for tuning in so far. Again, hope you rejoin us

after the break. Well, good morning, and thank you for tuning in with us on Let's Talk Money at eight ten WGY.

you know, please, I encourage you to reach out. You can get us at eight hundred talk WG Y. That's eight hundred eighty two five nine four nine, Vinnie, Could you take us through it's maybe some of the major differences you're seeing as you're analyzing the Republican plans versus the Democratic plans.

in the US economy, right. And you know a lot of that stems from an economist named Arthur Laffer who worked on President Reagan's administration, and his theory is that at a certain point, was the tax tax rate rises in the country, right, tax revenue will increase with it. Right. But once you hit a certain tax rate, his theory is that tax revenue will actually start to decrease. Right.

So that's really the Republican standpoint, conservative standpoint across the board that tax cuts and cutting taxes for businesses and individuals will really you know, drive tax revenue, and because

it incentivizes people that that's their theory. And you in twenty seventeen, during President Trump's first administration, they passed tax reform called the Tax Cuts and Jobs Acts, And really what that you know, new tax code brought to the country was lower individual income tax rates, lower corporate tax rates.

They doubled the standard deduction. They also incorporated a couple other provisions within that to sort of save folks taxes, but also at a certain point, you're reducing taxes, right, so you know, in general that may decrease tax revenue. Right. But they did things like put a cap on the

salt deduction. Right. So, if you were itemizing your deductions prior to twenty seventeen, you were able to take your state and local income taxes that you paid as the deduction mixed in with your real estate taxes, right, and there was no cap on that. But with the Tax Cuts and Jobs at they put a cap on, you know, the salt deduction, right, And if you really think about that, Yes, they lowered corporate tax rates. But if you were a lot of folks listening right now, this probably applies to you.

If you're a New York resident, you pay high real estate taxes, higher income taxes per se, then that reduction could have been pretty significant for you.

more because of that cap Right. So the provisions of the Tax Cuts and Jobs Act, you know, they were set to expire in twenty twenty five, right, So if there's no new law and active new tax code and acted, the you know, tax revisions will expire and we'll go back to the tax law prior to the Tax Custom

Jobs Act. So really, you know, the Republican you know, presidential nominee, and you know, if the Congress across the board gets you know elected in terms of the Republican Party, then we're going to probably see the Tax Cuts and Jobs Act get continued on and you know, passing the law and continue on forever long they see fit. So really that's one of the main things that the Republican Party is looking to do. And you know, the other thing that Republican Party is looking to do is, like

I said, they lowered corporate tax rates. Right. Corporate tax rates in this country used to be twenty eight percent, and with the Tax Cuts and Jobs Act, they reduce it to twenty one percent. Right. So again they're arguing that lowering corporate tax rates will drive economic growth, it will create jobs really because it's incentivizing folks to start businesses. Right.

I mean, the government is not taking as much money as they were before, so that's gonna you know, naturally incentivize folks to start businesses and you know, create innovation and you know, boost investments in this con And one of the most interesting laws enacted in the Tax Cuts and Jobs Act that I saw, and that has to do with corporate taxes, is you know, they they incorporated this tax called the guilty tax, Right, So you have

corporations in this country that will you know, do business overseas. Right, they might have controlled foreign corporations in Ireland or you know, Switzerland because you know, maybe those countries have lower corporate tax rates in the US, right, especially before the Tax Cuts and Jobs Act, when the corporate tax rate it was twenty eight percent. So it's called the guilty tax,

called the Global and tangible low tax income. So if these corporations are manufacturing the products overseas because it's cheaper labor or you know, the lower tax rate it applied incorporated a tax on the earnings in those in those countries. Because prior to that, these corporations were not paying tax on the income they were earning in these foreign countries. So that guilty tax basically is charging them US tax

on that income. Right, And what does that do? That obviously keeps you know, we lower the corporate tax rate, but that keeps tax tax revenue in the US and that also brings jobs back over the US. Right. That's really the thought process behind it, and that's something that the Republicans are going to want to you know, keep on, you know, keep on the ballot in terms of you know,

the U S tax code. Some of the other things that the Republican Party is looking to do were capital gains and dividend tax cuts, right, I mean those are steending from investments. Another you know, Republican conservative view on you know, the tax code is you know, promoting investment, promoting business growth, promoting economic growth, and cutting taxes on capital gain to dividends. Will do that in their eyes because it's going to again incentivize folks to invest, invest, invest,

because the government is taking less of their money. So on the flips side, the Democratic Party, as we all know, is their thought process is higher tax rates, right, fund social you know, welfare programs and you know, taxing the rich and taxing the one percent. That's really their m when it comes to taxes, and you know, in their eyes, that's going to create more tax revenue for this country

and decrease the federal deficit and what have you. So obviously, you know, if we have a Democratic nominee and you know, the House and Congress gets elected in terms of Democratic Party, we're going to have you know, increased individual income tax rates. They're probably gonna let that Tax Cuts and Jobs Act expire. Right, We're going to go back to you know, the highest tax bracket of thirty nine point six percent for the

highest earners. You know, some other things that Democratic Party is looking to do is you know, have higher capital gains taxes for you know, those folks earning over one million dollars per year. You know, they're really looking to you know, hit those higher earners you know, with taxes and kind of generate tax taxes that way and have you know middle class folks and lower uh, lower class folks, uh, you know, kind of just reap the benefits of that and not have to take the hit as much as

you know, those higher earners. And that's how the Republicans differ in this thaw process. They think that you know, cutting corporate tax rates, right, those are the big businesses,

you know, the the entities making all this money. They think that by having them having lower taxes, it's really alluding to the you know, the President Reagan's thought processes of trickle down economics, right that if you cut taxes across the board, the people you know that are earning less are going to reap the benefits through jobs, through you know, employment and and things of that nature. So that's really the difference in their thought process between the Democrats,

the Democrats and Republicans. And you know, also, the Democrats are probably going to look to increase corporate taxes. Just like I said, you know, it was twenty eight percent before. So by letting the tax cuts and jobs that die out, you're you know, they're going to allow that twenty one percent tax rate to go away and go back up to twenty eight percent. And that's obviously going to reverse a lot of what the Republicans had enacted in twenty seventeen.

They're really going to target those large corporations, you know, and again I think there's probably bipartisan agreement on you know, these corporations, having these controlled foreign corporations offshore and earning money overseas. I think that Democrats and Republicans both agree

on that. And you know, the Democrats will probably look to combat that in some way as well, and you know, kind of punish those corporations and get rid of those loopholes and and you know, generate tax revenue in that way. And you know, and the last thing and one of the most important things, and we deal with this a lot with some of our clients, right, is that a

state pack right, you know not. You know, it's about twenty four million, right, so if your state is above twenty four million, you could be subject to a state tax upon your pass. You know, the Democrats are really looking to lower that number. Right, that's that's a hard number to hit. And New York has a different number. It's much lower in terms of the New York state tax, but the federal you know exemption is pretty high. So the Democrats are looking to lower that number. And what

is that going to do. Obviously make more a state subject to a state tax, increasing tax revenue through that way, you know, and that would cause more states to be subject to taxation. And they have another proposal that you know, they are offering up to tax unrealized gains that deaths uh and in the state. Right, so now you know

there's something called to step up in basis. So if you have a taxable brokerage account and you have all these unrealized gains incorporated into it, upon your pass and your beneficiaries are going to receive your taxable account, but there's going to be no unrealized gains to get wiped away. So the Democrats are proposing is that that's not going to be the case anymore that you're actually going to

get taxed. The estate's going to get taxed on those unrealized gains versus the person that's the beneficiary, which you know, all in all, it's essentially the same thing. So you know, they're literally looking to punish those, you know, higher earners and higher net worth folks by lower that estate tax.

majority to get things done right. And so uh, certainly, as Vinnie went through, there's some parts of the tax cod that are going to expire, and there's others that you know that they're talking about change and and so it'll be you know, certainly uh an area of debate and but but certain expectations are changed. You know that there will be changes. And you know, I always like to beat the drum of the national debt and and you know there's no way you can't do that when you.

appreciate you tuning into our show this morning. You've got I'm John Malay, I've been the host, and I'm joined by my colleague Vincenzo Testa. Vinny just spent some time going through really some of the tax differences between the major you know, the Democratic Party and the Republican and some things that you know, we may see change as we get into twenty twenty five. Well, we appreciate you tuning in with us this morning. Again, we do We're here for you and if you have questions, we want

to hear them. And so we are getting close to the three quarter a little bit passed the three quarter market of the show, but it's not too late. If you have questions, I encourage you to call in. You can reach us at eight hundred talk WGY. That's eight hundred eight two five five nine four nine.

get into that, we have a caller Jim and allbody. Jim, appreciate you tuning in with us this morning, and what question do you have for us?

just a terrible tax state. And so what they did is to two other members of our tax team, Nicole Colboscottstrohecker did this webinar and really looked at, hey, if you're contemplating another state, you know, moving to another state,

what are some of the tax differences? And they went through a number of different factors, and you know, you know, New York, you know, it does get a bad rap, but you know, for retirees, it's it's you know, when you take it all into consideration, including the pension exclusion

that Vinnie just talked about. Uh, you know, it's not it's not a clear cut that you know, New York does not you know, rank as bad as uh, some of the perception is so h but Jimprechiate calling with that question, and you know, just you know, getting onto the Q three reporting season, and so we've got a couple you know, big banks coming in coming in with

a bank so markets certainly rewarded that. And then uh, you know, for the season, you know, we're expecting to see EPs, you know, ernixpres share growth around a little over four percent, which would be you know, the fifth straight quarter of bottom line growth, and also expecting to see you know, uh, you know, revenue growth just just shy of five percent. And so you know what is

interesting about this quarter. You know, many firms you know, lowered their expectations for Q three at the part of Q two and actually overall saw like a you know, a three point six percent decline in expectations, and you know, which is unusual, that's unusual high kind of revision of expectations downward, and it could set up the table for

some larger positive surprises. So that certainly could be in you know, if we see you know, beats of both revenue and EPs, you know, we could see more positive shares because you know, in Q two as a whole, you know, we did see seventy nine percent of the S and P five hundred beat their bottom line estimate,

but they beat them by very slim margins. And you know what we're seeing as investors, you know, reward those companies who who have you know, more significant victories, more significant you know, earnings over expectations versus those slim margins, or you know, they certainly punish, you know, for missed estimates. So it'll be interesting as we saw a decline and expectations going into Q three, you know, whether the lower expectations become a good catalyst for more impressive top line

and bottom line beats. But we'll see you know, as as we said, we're just getting kicked off with this. And you know, I also like to say, hey, quarterly results are backward looking, and really the forward looking guidance really does trump. Also, although it'll be interesting to see the results, I think more eyes are going to be on expectations for Q four and two thousand and five guidance in total. So in summary, good start to the earning season. But we're just starting and we've got really

a lot in front of us. So, Vinny, you know, getting back to the tax I know, from a tax planning and you know, here we are October, there's a little bit left to do for the end of the year year from a you know, a seasonal tax tip perspective, you know, I wanted to see as you finish up this show.

much you've contributed here to day. You know, if you have it all and if you're looking to maximize and hit that max for four one ks or four or three b's or IRA's just making sure you're doing that before the end of the year, and if that constitutes you increasing the contribution in your paycheck right and kind of make you have those catchup contributions to maximize it before the end of the year. You know, that's something you should definitely look into and start doing before we

hit twelve thirty one. You know, in harvesting capital gains and losses, right, you know, if you have some significant capital gains you realize this year or you know that you're going to, right, it's kind of just looking at your portfolio and in those taxable accounts and see if there's any positions that you that were dogs, right that had a significant unrealized loss. So if you are going to take capital gains, you could offset them with those losses. But the one thing to keep in mind is just

paying attention to that wash sale rule. Right, if you are going to take a loss within your taxable account in terms of the sale of stock, you can't just buy and sell it and then buy it again the next day. You have to wait thirty days or that loss will be it won't be recognized, right, So it's really something to look out for, and if it's if it's complicated, obviously work for the professional to can help you out. Make sure you're doing things in the correct way.

a smaller percentage out of a tax deferred account. Right when the market dips and your account goes down twenty percent, you're able to move up a smaller percentage and you would have when the market was up into a tax free account that's going to grow. When the market rebounds, all of those gains are going to be tax free, right, So doing roth conversions are definitely something to look into. It for the end of the year, even though the

markets are high, they're beneficially either way. But the most optimal time to do it is when you know there's a correction or we're in a bear market. So definitely something to look into and again work with the professional when you're doing this. A lot of nuances to it, but definitely talk to someone who knows what they're talking about.

The other thing is two is before the end of the year charitable giving right, Well, giving can be a tax deduction under tax return right, and you do it the correct way, you can really optimize your tax situation, right if you you know, for instance, we use something called donor advice funds at the firm, right, and these are funds that you make contributions into, right, and the initial contribution is considered the charitable contribution, even though you're

not directly contributing to a charity. Right. The donor advised funds allows those funds to sit in that account and they could be invested, they could sit in cash and you write checks or have you know, the custodian send money to the charities that you're choosing, and it could be the year after, it could be two years after,

but the initial contribution is tax deductible. You know, they're a great thing to utilize and definitely something to look into before the end of the year if you're charitably inclined.

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