Will The Tax Increases Lead to a Recession?

We believe we are in a disruptive time in our economy. You can argue that families have been budgeting for higher taxes, and businesses have been cutting back on spending in preparation for the fiscal cliff. Perhaps it is true. People are keeping their powder dry. We think the president is on a power roll, and unfortunately, there is nothing going on in Washington D.C. to make taxpayers or investors feel good about our current situation.

“Recession” however, may be too strong of a word. We believe that this quarter, people and businesses will stay conservative; thus, we expect first quarter GDP to be low or close to zero. We believe it is also likely that second quarter may see a negative GDP. We are not predicting a 4% drop off the cliff. If it weren’t for the current politics over the fiscal cliff weighing on us, we feel we have a very good economy today.

Some reports have shown a reduction in the shadow inventory of homes and that most of the foreclosures have been worked off. If most banks are in the clear, the housing surge we are seeing may have staying power.

ISI reported there were more than 386 stimulus announcements in the past 16 months worldwide; therefore, almost the entire world had a vested interest in making sure growth picks up soon. We do not believe earnings will be down, as it is possible for companies to report earnings and for profits to rise in a recession. Again, we are not predicting a drop of 4%. We merely do not see growth for a quarter or two. The tax laws were not as bad as expected. Regardless of whether Congress raises the debt ceiling or they let sequestration begin, the cuts represent only 0.5% of GDP.

The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.