With the re-election of President Obama, investors are looking to position themselves for the future, and that means focusing on how any tax increases may take a bite out of their portfolios, according to BNY Mellon's top analysts.
Now that a second Obama term is a reality, investors are advised to diversify to minimize any negative consequences from a potential increase in the capital gains tax, said Dick Hoey (left) at a media briefing on Wednesday in BNY Mellon's Park Avenue offices in Manhattan.
For example, he said, now is a good time for families with large holdings in a single stock to think about moving some money into other more sheltered securities. (His fixed-income colleague David Leduc, chief investment officer of Standish Mellon Asset Management, recommends corporate credits and looking overseas to sovereign debt.)
"There is a substantial likelihood of higher capital gains," Hoey said. "The current rate is the lowest capital gains tax that you, your children or your grandchildren will see in their lifetimes."
Time to Face Facts
Hoey, along with BNY Mellon Investment Management CEO Curtis Arledge and C-level officers at the briefing, also recommended that advisors and their clients watch in 2013 and beyond for inflation, currency debasement and a pullback from the fiscal cliff during Obama's second term.
Arledge said his impression of Obama's Tuesday night acceptance speech was that the president set a somber tone for the economic problems the nation now faces, and that he refused to sugarcoat the need for greater fiscal responsibility.
"Last night's speech shows Obama needs the whole country to be engaged," Arledge said. "I think it's the best speech he's ever given."
Key to Obama's second term will be his choice of Treasury secretary, and Erskine Bowles may fit the bill, Arledge surmised, adding that in any case the new appointee must focus on reducing the U.S. deficit. And while the average citizen doesn't think much about the deficit, it's likely that Obama and his new Treasury secretary will spend some time teaching Americans about purchasing power, currency debasement and high debt-to-GDP ratios, Arledge said.
