In our 2018 reviews, Brian and I discussed the potential impact of the November elections on the markets, and more importantly on your plan.  Now that these elections are in the history books, we would like to revisit those observations and refocus on what it means to you. Democrats take the house: With the return to divided government, it is unlikely that any major changes in the new tax law will take place.  Should the House of Representatives initiate legislation to change the new rules, there is no chance that the Senate will approve or that President Trump will sign the legislation.  That means we have the current tax rules at least through 2020 with little material changes.  You now have a window for three tax years, 2018-2020, where you have lower tax rates and relative certainty that these rates will not change.  What does that mean for you. 1.      If you have moderate income and substantial retirement plan assets, a Roth conversion now would be less expensive than it will likely be in the future. 2.      If you have cash value life insurance, moving taxable assets into these contracts could give you some future tax benefits.  (You will want to have us do an evaluation for you to determine the efficacy of this strategy.) 3.      If you are still accumulating, you should consider deferring income to a Roth IRA or Roth 401 (k) to avoid future tax on the gains and distributions. 4.      Taxable assets should be moved to tax efficient management programs that will limit taxable distributions and give you gains that will receive capital gains treatment.   2020 and Beyond: As bizarre as it seems, the 2020 election cycle has begun before the newly elected representatives have been sworn in.  It is too early to speculate on the specifics of what we will be monitoring.  There are a few general observations that are pertinent. 1.      We can assume that if divided government continues, gridlock will also continue. 2.      If Democrats gain control, the tax rules will be subject to change. 3.      If Republicans gain control, the tax rules will likely stay intact. 4.      In the unlikely situation where the two parties can work together, you may see some adjustments. The Economy Markets and Investments: This fall has been a roller coaster for equity investments.  Allow me to remind you of our focus in our 2017-2018 plan reviews.  Our statement was that when interest rates rose to the 3% range, assets would move from equities to safer investments creating volatility.  This fall the 1-year Treasury rose over 3% for the first time in years and the equity markets began their gyrations as assets began to move to a safer, guaranteed return.  At the same time, the tech stocks that have driven the indices for the past several years came under suspicion for privacy and censorship concerns. For the US economy, all systems are go.  The tax reform and relaxed regulatory environment have spurred growth and reduced unemployment to levels not seen in decades.  While some economists are concerned that the tax impact will be short lived, we believe that it is too soon to tell.  Much depends on the political environment which drives the regulations and business decisions.  Since that should be relatively stable for at least the next 2 years, we do not see a downturn soon. The global economy is not so robust.  In Europe the EU is moving toward the cessation of quantitative easing which has flooded the region with liquidity.  Whether or not the economy will take off is yet to be seen.  In China, the dispute with the US over trade practices and intellectual property overshadows the reality that China is still struggling to stabilize their economy as they incorporate billions of people into a consumer system. What does that mean for you: We encourage you to continue to take the long-term view.  Our mantra has always been Time-Need-and Tolerance.  As such here are our thoughts. 1.      Your liquidity needs should be defined and set aside.  Do not expose short term needs to the current market liquidity. 2.      Evaluate your holdings considering the current tax environment.  This is a window of opportunity for some that will likely close in a few years. 3.      Don’t be afraid to take profits.  Low taxes and high market valuations are a good combination. 4.      Beware of home country bias.  Some of the best investments today are overseas. 5.      Talk to your advisor.  Understanding your plan and communicating your concerns are a recipe for success. These are the opinions of David M. Wheat and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  Neither Cambridge Investment Research nor Axiom Advisors, LLC offers tax advice.  Please consult your tax advisor for any tax related advice.