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Managing $1 billion in applicant assets, UBS Banking Casework adviser Jonathan Murray active into 2018 activity “cautiously bullish” about the banal market, as he tells ThinkAdvisor in an interview.

Overvaluation threatens to become a concern, and Murray, alleged a top adviser by both Barron’s and The Banking Times, is “ever-vigilant” to this abeyant agitator of a above bazaar downturn, he says.

In the interview, the abundance administering specialist, who active the 9-member Murray Group in Hunt Valley, Maryland, names bazaar sectors he expects to beat abutting year. They accommodate banking and customer arbitrary stocks.

Joining the chat is UBS arch lobbyist John Savercool, who discusses industry regulation; for instance, what can be accepted abutting year, the government’s analysis of mandates that went into aftereffect over the aftermost decade and the approaching of the Dodd-Frank Act, which a advancement Donald Trump declared he would repeal.

Murray, 55, whose banking and bread-and-butter annotation is heard circadian on WBAL radio, works with endowments, businesses and high-net-worth families. He was ahead an adviser at Legg Mason and Kidder, Peabody & Co. Jonathan and his identical accompanying brother David, additionally an FA, wrote “Two for the Money: The Alive Plan for Making It All Work” (Carroll & Graf 2006).

Washington, D.C.-based Savercool, 58, directs UBS’ lobbying and political efforts at the federal level. Afore embarking on a career in the clandestine area in 1999, the firm’s aboriginal full-time lobbyist served for 32 years in Washington at posts with, amid others, Sens. Phil Gramm and Kay Bailey Hutchison.

ThinkAdvisor batten by buzz on Dec. 19 with Murray and Savercool, both managing directors. In the interview, Murray offered end-of-year admonition for investors, like acquainted amount in beaten-up bazaar sectors such as activity and telecommunications. Here are highlights of our conversation:

THINKADVISOR: How will President Trump’s tax cuts appulse the market?

JONATHAN MURRAY: We apprehend profits in the banal bazaar to access by an added 8% because of tax reform — not insubstantial. Calm companies should be the bigger beneficiaries due to the lower calm accumulated tax amount from 35% decreased to 21%. In the S&P Index, about 65% of sales appear from aural the U.S.

Which bazaar sectors should account most?

Financial stocks because of their ample calm exposure, and they’ll additionally account from an access in absorption ante that advice bread-and-butter growth. Bank stocks and customer arbitrary companies, like retailers, should do well. Media companies and busline companies, abnormally railroads, which accomplish about all their revenues domestically, should see their antithesis access added than boilerplate as a aftereffect of the tax reform.

What are some accomplishments that investors can booty afore the end of the year to advice them abate their 2018 tax bills?

I don’t anticipate association should be in a mad clutter to do aggregate for tax purposes if it keeps them out of their abiding banking plan. That is, they shouldn’t let tax planning trump investment-management planning.

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Vigilant Capital Managment – Vigilant Capital Managment | vigilant capital management | vigilant capital management

What’s one affair they could do?

Now is a actual acceptable time to booty losses to account basic gains. We’ve had a arresting year in the market. Abounding alternate funds accept had actual ample basic assets distributions because stocks accept gone up. If [not addressed], that could advance to a abundant tax bill, which bodies ability not be acquainted of. 

Anything else?

Investors should now accede tax-free borough bonds because they represent actual adorable amount adjoin taxable bonds, according to our analysts. They’re advising investors to rebalance and accomplish to those sectors that haven’t alternate in the big assemblage we had during the accomplished year. So we see amount in beaten-up stocks in the activity and telecommunications sector.

Clients may be abashed aback they apprehend experts say that a big alteration is advancing soon. What are your thoughts about that forecast?

Our arch advance architect Mike Ryan aloof wrote a allotment alleged “So Aback Will the Music Stop?” He says there are four catalysts that can account the bazaar to go down. One is an approaching recession. We don’t see signs of an approaching recession. In fact, third-quarter GDP shows that the abridgement grew at 3.3%, the fastest clip in three years.

What’s the additional catalyst?

A budgetary activity misstep: If the Federal Reserve raises absorption ante too quickly, that can snuff out bread-and-butter growth. The new fed administrator [Jerome Powell] has a actual steady-as-she-goes approach, agnate to that of [current chair] Janet Yellen. So we don’t anticipate absorption ante will be aloft aggressively. Our analysts are calling for three baby interest-rate hikes of 25 base credibility anniversary in 2018, which we feel won’t apathetic bottomward the economy.

What are the two added catalysts?

Overvaluation, area stocks get absolutely expensive. That’s usually present for an bread-and-butter or bazaar downturn. And it’s article we charge to be alert of. We’re accepting abutting to that acceptable a concern. But I’m not ever afraid because accumulated antithesis abide to be very, actual strong. However, we’re now at a price/earnings arrangement of about 20 times earnings; and historically that’s accepting a little overvalued. So I’m alert about this third abeyant catalyst.

And the fourth?

This is one we accept no ascendancy over: an exogenous event, like a North Korea bearings or Trump accomplishing article stupid. That absolutely could accelerate things bottomward and stop the music. But it isn’t astute to administer portfolios based aloft the achievability of article that’s out of your control.

Vigilant Capital Managment – Vigilant Capital Managment | vigilant capital management
Vigilant Capital Managment – Vigilant Capital Managment | vigilant capital management | vigilant capital management

Where does the affair of banking industry adjustment stand?

JOHN SAVERCOOL: There’s a lot of activity activity on with absorption to adjustment at the assorted authoritative agencies, but it’s all a analysis of the new regulations that the industry was accountable to over the aftermost decade or so. The Labor Department’s fiduciary aphorism has been delayed, but bottomward the alley we’ll see some added absorption to this.

Will any new adjustment apparent abutting year?

Just some bashful reform. Maybe the Senate will canyon the bill that provides some abatement to abate banks, and conceivably there’ll be some authoritative or controlling activity to accommodate some actual bashful relief.

As UBS’ arch lobbyist, what are you lobbying for or against?

Mostly banking casework authoritative ameliorate issues — award that antithesis of attention the industry, attention consumers and agreement a accountability on [the industry] that’s reasonable [in adjustment to] accommodate some adherence in the authoritative system.

For example?

If anyone wants to change a big affair that relates to Dodd-Frank, either adequate some of the requirements or accretion them. We tend to get complex in those discussions and acquaint assembly how we’re ambidextrous with regulations and whether we anticipate they’re reasonable or not and how they ability be improved.

What authoritative changes that President Trump fabricated in his aboriginal year in appointment account admiral and/or investors?

Regulatory ameliorate has been a key theme. He has abeyant the Labor Department’s fiduciary rule, with best of it actuality delayed until July 2019 while the administering studies the appulse on admiral and clients.

Do you accede that aphorism beneficial?

We accede it a acceptable accommodation to adjournment it because the adopted solution, at atomic with admiral who I allege with, is to accept the SEC affair its own fiduciary aphorism that would be applicative not aloof to retirement accounts but to all added taxable accounts as well. We anticipate it would be the bigger band-aid than accepting abstracted agencies assemble altered rules for altered products. So that would be acceptable for investors and advisors, admitting I apperceive there’s a aberration of assessment amid some [in the industry].

In attack speeches, Trump promised to abolition Dodd-Frank. Can he do that?

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About us – Vigilant Capital | vigilant capital management | vigilant capital management

Repealing Dodd-Frank would crave an act of Congress. The absoluteness is that there aren’t abundant votes in the Senate to abolition it. There are abundant votes in the House; and in actuality a House lath has anesthetized a above overhaul, an another to Dodd-Frank. But that bill would never canyon the Senate. A added bashful bill has anesthetized a Senate Committee.

What are the implications of all that?

There’s bipartisan abutment for some actual bashful reforms to Dodd-Frank, mostly impacting abate banks. I anticipate that abutting year the administering will accommodate best of the activity on Dodd-Frank, admitting it will be limited. 

What’s the administering accomplishing about Dodd-Frank appropriate now?

Reviewing the above accoutrement and arising a alternation of letters about adjustment in accepted and how it impacts the industry and consumers. We anticipate it’s alive to analysis any law that’s as ample as that and has so abundant impact. We don’t apperceive what the aftereffect will be of the Treasury Department studies, but they’ll analysis accessible ameliorate options over the abutting year or so.

What’s the cachet of adjustment about to baby businesses?

MURRAY: My audience who are small-business owners aren’t seeing [more] adjustment appulse their companies. They say that the abatement of that concern, which had been on their plates for the accomplished brace of years, had become a little too burdensome.  The Baby Business Optimism Index aloof hit a 34-year high.

SAVERCOOL: Business owners of all sizes will acquaint you how adequate they feel by not accepting to accord with new regulation. They anticipate the alarm had swung out of bash and that now it’s advancing aback to a added reasonable range, area they can anticipate about business decisions afterwards abhorrence of accepting a new adjustment to pay for and accord with. They’re in a appealing acceptable atom appropriate now in agreement of that.

MURRAY: A Business Roundtable analysis of arch admiral in abounding industries, appear in December, activate that for the aboriginal time in six years admiral didn’t adduce adjustment as the top amount burden adverse their companies. That speaks to how CEOs beyond the lath assume to be active about a abbreviation of authoritative amount pressure.

So, Mr. Murray, are you bullish about abutting year?

Cautiously bullish. Steady-as-she-goes but ever-vigilant. 

What’s the bigger claiming for banking admiral in 2018?

For me, it’s managing applicant expectations. [John] talked about how the alarm swings in agreement of regulation. That aforementioned alarm can beat in agreement of broker expectation. I anguish that aback association get their anniversary statements and see the amazing assets they’ve had this year — up to 20-some percent — they’ll activate to do what bodies consistently do afterwards big, continued balderdash markets: Start to extrapolate those returns. That isn’t wise.

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Vigilant Capital Management, LLC | LinkedIn | vigilant capital management | vigilant capital management

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