Investment
These are the top Money and investment trends to watch out for in 2020 – USA TODAY
All in all, 2019 was a pretty strong year for the economy.
Job growth was brisk, with both inflation and interest rates low. Economic growth was decent as recessionary fears have abated. Consumers remain confident, highlighted by solid holiday sales.
But this doesn’t mean everyone is prospering. Here are some money and finance trends to watch for in the coming year:
Continuing debt overhang
Now 10 years into the economic recovery, plenty of Americans are only treading water. Pay raises have been spotty, and many people continue to live paycheck to paycheck. Too many households still lack emergency funds, let alone long-term investments.
Some 82% of people who participated in a survey released this month by Fidelity Investments said they’re in a similar or better financial position compared to last year. Yet in the same poll, respondents revealed continuing anxiety about making ends meet and keeping debts under control.
Dealing with unexpected expenses was the top concern among respondents heading into the new year. Another was keeping a lid on debts. The top three New Year’s resolutions cited by respondents are to save more, pay down debt and spend less.
Many individuals still aren’t prepared to meet unforeseen money pressures.
“A large portion of the people I talk to in a given year find that their financial troubles come in steps that cause significant hardship: medical debt, a job loss, a major car repair, a family emergency,” said Jonathan Walker, executive director of the debt-focused Elevate Center for the New Middle Class in Fort Worth, Texas.
Yet many people just keep adding debt until the hurdles eventually become too high, with unexpected challenges finally pushing them over the edge, he said.
Retirement help coming
Plenty of Americans are unprepared for retirement. Reasons include not saving enough, making premature withdrawals and not having access to 401(k) plans through work.
That could start to change now that the SECURE Act, with broad bipartisan support, was passed by the House of Representatives and the Senate this month as part of a federal spending bill.
Among other things, the legislation would expand access to retirement-savings programs for part-time workers and people employed by small businesses, by providing employer incentives and making it easier for small businesses to band together to create 401(k) plans and benefit from economies of scale.
In addition, it would make annuities available in workplace 401(k) plans, providing investors with a way to lock in guaranteed income for life.
The legislation also would tweak Individual Retirement Accounts. Seniors with traditional IRAs who don’t need to spend their money immediately could delay required minimum distributions until age 72, up from 70½ currently. Also, older workers could continue to sock away money into IRAs. Currently, contributions must stop after age 70½.
The IRA changes reflect “the reality that people are living longer today,” said Paul Schott Stevens, president and CEO of the Investment Company Institute.
Good investment results still likely
It might be hard for the stock market to repeat a year like 2019, with the Dow Jones Industrial Average and other barometers up more than 25% through mid-December. But solid economic growth, low interest rates and other factors create a backdrop where the market’s positive momentum could persist.
“The remarkable longevity of the (economic) expansion and a continuation of low inflation and unemployment are all significant positives,” said J.P. Morgan’s markets insight team in a December forecast.
A possible slowdown ahead in economic growth, and rising wages, could put pressure on corporate profits, which could hamper stock prices, the forecast added. So could the threat of higher taxes, more trade tensions and a bloated federal budget deficit expected to top $1 trillion in the current fiscal year.
But while J.P. Morgan sees risks rising, it still expects the stock market to “grind higher” in 2020.
Incidentally, years when presidential elections are held tend to be favorable for stocks, and 2020 falls into that category. The broad market as represented by the Standard & Poor’s 500 has advanced in 19 of the past 23 presidential-election years, dating to the 1920s.
The country might be sharply divided when it comes to politics, but elections also tend to bring a lot of excitement and even optimism.
Rhetoric but little action on taxes
It’s unlikely that we’ll see passage of a major federal tax bill in the coming year — not with a deeply divided Congress in an election year. But Americans will be hearing a lot more about tax proposals as the campaign swings into high gear.
Most proposed changes are coming from Democratic presidential contenders. These include calls to raise tax rates for the highest-earning Americans, expand the earned income tax credit, boost the amount of personal income subject to Social Security taxes (from a current cap at $132,900) and jack up tax rates on dividends and capital gains.
Most radical are the proposals to tax the wealthiest Americans on their net worth, as advanced by Democratic presidential candidates Bernie Sanders, Elizabeth Warren and others.
To help people keep track of these ideas, the Tax Foundation has compiled a tax-plan summary for the leading presidential contenders here or at taxfoundation.org.
Could these proposals become law after the election? it would be a stretch for the most extreme changes, but you never know.
Most respondents in a December survey by the Pew Research Center said they felt today’s economy has mainly benefited the wealthy. A majority of respondents cited poor people, those lacking college degrees, the elderly, young adults and the middle class as groups now being hurt.
Broader help from employers
Workers — especially those at larger corporations — probably can look forward to more benefits and perks in the coming year beyond just paychecks, vacation/sick days, health insurance and perhaps a 401(k) savings plan.
Financial and health wellness programs continue to gain appeal, said Fidelity Investments in a recent review of workplace benefits. These include programs to help with mental and substance abuse as well as deal with student loans, budgeting and other financial pressures.
In part, these efforts address productivity and absenteeism: If companies can help their employees deal with personal problems, they could develop into more reliable and productive workers.
Fidelity also sees a trend toward greater social responsibility in the workplace including more company subsidies for charitable giving and volunteering, with more flexible work schedules and work spaces.
As for older workers, Fidelity expects to see more companies assist their employees and recent retirees in making retirement-plan withdrawals.
Until now, the focus has been in helping workers accumulate savings in 401(k)-type programs. Now, more employers apparently feel responsible for helping them pull out assets in a smart, efficient manner.
Investment
Bill Morneau slams Freeland’s budget as a threat to investment, economic growth
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Finance Minister Chrystia Freeland’s predecessor Bill Morneau says there was talk of increasing the capital gains tax when he was on the job — but he resisted such a change because he feared it would discourage investment by companies and job creators.
He said Canada can expect that investment drought now, in response to a federal budget that targets high-end capital gains for a tax hike.
“This was very clearly something that, while I was there, we resisted. We resisted it for a very specific reason — we were concerned about the growth of the country,” he said at a post-budget Q&A session with KPMG, one of the country’s large accounting firms.
Morneau, who served as Prime Minister Justin Trudeau’s finance minister from 2015 to 2020 before leaving after reports of a rift, said Wednesday that Freeland’s move to hike the inclusion rate from one-half to two-thirds on capital gains over $250,000 for individuals, and on all gains for corporations and trusts, is “clearly a negative to our long-term goal, which is growth in the economy, productive growth and investments.”
Morneau said the wealthy, business owners and corporations — the people most likely to face a higher tax burden as a result of Freeland’s change — will think twice about investing in Canada because they stand to make less money on their investments.
“We’ve created a disincentive and that’s very difficult. I think we always have to recognize any measure that creates a disincentive for investment not only impacts us within the country but also impacts foreign investors that are looking at our country,” he said.
“I don’t think there’s any way to sugarcoat it. It’s a challenge. It’s probably very troubling for many investors.”
KPMG accountants on hand for Morneau’s remarks said they’ve already received calls from some clients worried about how the capital gains change will affect their investments.
Praise from progressives
While Freeland’s move to tax the well-off to pay for new spending is catching heat from wealthy businesspeople like Morneau, and from the Canadian Chamber of Commerce, progressive groups said they were pleased by the change.
“We appreciate moves to increase taxes on the wealthiest Canadians and profitable corporations,” said the Canadian Labour Congress.
“We have been calling on the government to fix the unfair tax break on capital gains for a decade,” said Katrina Miller, the executive director of Canadians for Tax Fairness. “Today we are pleased to see them take action and decrease the tax gap between wage earners and wealthy investors.”
“This is how housing, pharmacare and a Canada disability benefit are afforded. If this is the government’s response to spending concerns, let’s bring it on. It’s about time we look at Canada’s revenue problem,” said the Canadian Centre for Policy Alternatives.
The capital gains tax change was pitched by Freeland as a way to make the tax system fairer — especially for millennials and Generation Z Canadians who face falling behind the economic status of their parents and grandparents.
“We are making Canada’s tax system more fair by ensuring that the very wealthiest pay their fair share,” Freeland said Tuesday after tabling her budget in Parliament.
WATCH: New investment to lead ‘housing revolution in Canada,’ Freeland says
The capital gains tax, which the government says will raise about $19 billion over five years, is also being pitched as a way to help pay for the government’s ambitious housing plan.
The plan is geared toward young voters who have struggled to buy a home. Average housing prices in Canada are among the highest in the world and interest rates are at 20-year highs.
Tuesday’s budget document says some wealthy people who make money off asset sales and dividends — instead of income from a job — can face a lower tax burden than working and middle-class people.
Morneau, who comes from a wealthy family and married into another one, is on the board of directors of CIBC and Clairvest, a private equity management firm that manages about $4 billion in assets.
According to government data, only 0.13 per cent of Canadians — people with an average income of about $1.4 million a year — are expected to pay more on their capital gains as a result of this change.
But there’s also a chance less wealthy people will pay more as a result of the change.
Put simply, capital gains occur when you sell certain property for more than you paid for it.
While capital gains from the sale of a primary residence will remain untaxed, the tax change could affect the sales of cottages and other seasonal and investment properties, along with stocks and mutual funds sold at a profit.
A cottage bought years ago and sold for a gain of more than $250,000 would see part of the proceeds taxed at the new higher rate.
But there’s some protection for people who sell a small business or a farming or fishing property — the lifetime capital gains exemption is going up by about 25 per cent to $1.25 million for those taxpayers.
Freeland said Tuesday she anticipates some blowback.
“I know there will be many voices raised in protest. No one likes paying more tax, even — or perhaps particularly — those who can afford it the most,” she said.
“Tax policy is not only, or chiefly, the province of accountants or economists. It belongs to all of us because it is how we decide what kind of country we want to live in and what kind of country we want to build.”
Morneau had little praise for what his successor included in her fourth budget.
Morneau said Canada’s GDP per capita is declining, growth is limited and productivity is lagging other countries — making the country as a whole less wealthy than it was.
Canada has a growth problem, Morneau warns
The government is more interested in rolling out new costly social programs than introducing measures that will reverse some of those troubling national wealth trends, he said.
“Canada is not growing at the pace we need it to grow and if you can’t grow the size of the pie, it’s not easy to figure out how to share the proceeds,” he said.
“You think about that first before you add new programs and the government’s done exactly the opposite.”
The U.S. has a “dynamic investment culture,” something that has turbo-charged economic growth and kept unemployment at decades-low levels, Morneau said. Canada doesn’t have that luxury, he said.
He said Freeland hasn’t done enough to rein in the size of the federal government, which has grown on Trudeau’s watch.
The deficit is now roughly double what it was when he left office, Morneau noted.
“There wasn’t enough done to reduce spending,” he said, while offering muted praise for the government’s decision to focus so much of its spending on the housing conundrum. “The priority was appropriate.”
Investment
Saudi Arabia Highlights Investment Initiatives in Tourism at International Hospitality Investment Forum
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RIYADH, Saudi Arabia — The Saudi Ministry of Tourism is currently taking a prominent stage at the International Hospitality Investment Forum (IHIF), presenting a unique opportunity for global investors to dive into the thriving tourism landscape of the Kingdom. With the spotlight on the Tourism Investment Enablers Program (TIEP), that was recently announced, Saudi Arabia is aggressively pushing towards its Vision 2030 goal of being a top global tourism destination for investors and tourists alike.
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This strategic presentation comes at a time when Saudi Arabia’s tourism sector celebrates an incredible milestone of 100 million visitors in 2023, seven years ahead of schedule, marking a significant stride towards economic diversification and emphasizing the sector’s growing contribution to the national GDP. The flagship Hospitality Investment Enablers (HIE), one of TIEP’s initiatives, aims to leverage this momentum, planning an investment infusion into the hospitality sector of up to SAR 42 billion in key destinations, which alone is anticipated to create 120,000 new jobs by 2030.
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The IHIF audience is getting a close look at Saudi Arabia’s plans to expand its accommodation capacity dramatically. The Kingdom is targeting an increase in hotel rooms to over 500,000 and aiming to welcome 150 million visitors annually by 2030. The HIE stands at the core of these ambitions, designed to energize the hospitality sector by introducing a new wave of supply in targeted tourism hotspots, significantly enriching the Kingdom’s diverse tourism offerings.
The initiative is supported by a suite of strategic enablers, including access to government-owned land under favorable terms, streamlined project development processes, and regulatory adjustments aimed at reducing barriers to market entry and operational costs. This comprehensive approach is expected to catalyze a significant socio-economic transformation within the Kingdom, with private sector investments projected to reach SAR 42.3 billion and a forecasted annual GDP increase of SAR 16.4 billion by 2030.
Saudi Arabia’s active participation in IHIF aims to showcase the Kingdom as an enticing investment frontier for international investors, emphasizing the lucrative opportunities within the tourism and hospitality sectors. This global stage provides the perfect platform for the Ministry of Tourism to forge lasting partnerships and highlight the Kingdom’s commitment to elevating its tourism industry standards, fostering sustainable growth, and offering robust support to investors.
Through this engagement, the Saudi Ministry of Tourism is not just showcasing investment opportunities; it is inviting the world to be a part of Saudi Arabia’s ambitious journey towards redefining global tourism norms. Investors are encouraged to seize this unparalleled chance to collaborate with the Kingdom, as it paves the way for a new era of tourism excellence aligned with Vision 2030’s transformative objectives.
Investment
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