One Tampa-based financial expert sees a positive economic outlook for 2018, yet also remains cautious about decades ahead.
John Largent, chief investment strategist at Members Trust Company, was the featured speaker at a Dec. 13 business-networking event hosted by the San Antonio Federal Credit Union.
He offered an encouraging assessment of the current U.S. economy.
“We’re at a stock market all-time high,” Largent told an audience of small business owners at the Scotland Yards Golf Club.
“Yields are low. Housing prices are back. All those great things like that are going on,” Largent said.
But, he cautioned that how the foreign-owned U.S. debt market is managed is something “to worry about a little bit.”
Last week, the Federal Reserve (Fed) raised interest rates by 0.25 percent, the third increase in 2017.
The decision to raise interest rates, raising the cost of borrowing, takes the Fed farther away from the ultra-low rates it put in place during the financial crisis to boost economic activity.
Even so, Largent explained the Fed’s policy to keep “artificially low” interest rates for too long — combined with negative interest rates in several European countries — could wreak havoc sometime over the next several decades.
“There will be consequences,” said Largent, who’s been an active panelist for Morningstar Advisor, Index Universe, and S&P Dow Jones Indices.
“Hopefully they won’t be as bad as ‘07 and ‘08 with the housing deal, because (investment banks) are not leveraged in this…but, our governments are really, really leveraged.”
Largent began his career on the floor of the New York Stock Exchange. He has more than 30 years of experience in the financial services industry and is past president of Chartered Financial Analyst Tampa Bay.
Since joining Members Trust Company in 2004, his team has grown managed assets from $60 million to over $2 billion.
Besides the global economy, Largent also discussed the recently finalized “Tax Cut and Jobs Act.”
The Republican plan is the largest one-time reduction in the corporate tax rate in American history — from 36 percent down to 21 percent. The bill also lowers taxes for the vast majority of Americans and small business owners — at least until the cuts expire after eight years.
Largent said the deal generally “could be a positive thing for corporations, to make it a little more competitive.”
He added the movement to 21 percent “is not a big deal,” as the Effective Tax Rate of all companies in the United States “is about 22 percent.”
“If you’re at a 36 percent tax bracket, you’ve got a windfall. However, if you’re at 15 (percent), you may be at (21) percent, and that’s not so good,” Largent explained.
He does, however, anticipate the tax plan yielding “unintended consequences” in due time.
“The law of unintended consequences is something that is absolutely very real when you move from 36 (percent) to 21 (percent),” Largent said, “and you did it so fast that you didn’t think of the consequences of this thing…”
The speaker also briefly touched on the bitcoin phenomenon that’s created a global stir.
Bitcoin is the first decentralized digital currency, created and held electronically.
He suggested it’s not really something U.S. consumers should be concerned with, even though it debuted on the world’s largest futures exchange.
“It’s a massive marketing success story,” Largent. “It’s one of the best marketing success stories ever.”
While fascinated by the cryptocurrency, Largent noted bitcoin doesn’t have a value; rather it’s just a medium of exchange.
“It’s kind of fun; that’s about it,” Largent said.
Published December 20, 2017
