At the end of the year, the media is full of retrospectives on the top news events and celebrity stories, so with that in mind, I set my thoughts to what are the biggest news happenings that have affected people on their journey to financial independence and retiring early (FIRE) in 2017.
Here’s my list (in no particular order) …
TRUMP BUMP – The stock market, which began it’s latest bull run-up following the 2016 Presidential Election continued to shoot up in 2017. The S&P 500 is up 20% this year with total market gains of $4 trillion since Trump was elected. You can dispute how much credit he deserves for the run-up, but it is destined to be remembered as the ‘Trump Bump’.
TAX REFORM – Much of the stock market growth has been fueled by expected Corporate Tax Reform. This was the centerpiece of the plan passed by the GOP. In addition, individual tax payers will have more money to put toward their FIRE nest eggs as the CBO estimates that more than 80% of taxpayers will see their taxes go down – with an median benefit of $2K. I expect that our taxes will go down only about 1% – largely because of the loss of SALT deductions, which were significant in our high-tax state of MN.
INTERNATIONAL BOUNCE BACK – The USA wasn’t the only market to post strong growth in 2017 as International equities (EFEA) grew +21%. This is a great bounce back for International stocks, which were down -2% last year and -3% the year before.
LOW INFLATION – Through November the annual CPI in the USA is just 2.2%. That makes the growth of stocks that much more impressive and marks the sixth straight year that is has been held under 3%. When I look at sensitivities in our FIRE financial plan, the one that always scares me is inflation. An increase of a single percentage point (or even a half a point) makes a huge difference in our portfolio needs.
HEALTH INSURANCE – Medical coverage is a huge concern of people on a journey to FIRE and 2017 has been another disaster of a year. Our Health Insurance is set to rise more than 50% next year – as no reforms were passed by the GOP and Federal subsidies were cut outright. As a result, the costs for low-income households and folks with pre-existing conditions have been passed largely to the folks in the individual market. We’ll hope that free market reforms will be teed up in 2018, but in the short term in hurts financially.
STAGNANT INTEREST RATES – The Federal Reserve doubled the Federal Funds Rate from 0.75% last December to 1.5% today. It hasn’t affected Treasury Bond yields in a big way, however. A 10-Year bond sits at 2.47% today (up only slightly from year ago) and a 1-Year CD at my local bank still earns only 0.4%.
BITCOIN / CRYPTOCURRENCIES – There perhaps wasn’t any story more interesting in 2017 than the incredible emergence of Bitcoin and other Cryptocurrencies. Many people still aren’t sold on the value of this digital currency, while others see it disrupting government control of fiat currency. The value of Bitcoin has grown 15x-20x over the course of the year and has everyone talking. I made a small purchase in July and wish people would focus more on its practical value as an alternative to dollars and less as an investment.
Our portfolio had a terrific finish to the year. After spending most of the year in the doldrums, MegaCorp stock shot up 20% in the last 6 weeks – which was multiplied by our stock option holdings. While the stock is still slightly down for the year (flat, with dividends), this amazing rebound (combined with the fantastic broader market results) put our FIRE portfolio back on ahead of our goals. I wouldn’t have guessed two months ago that this would have been possible, but it was a nice gift to find under the Christmas Tree!
Thanks to all of the MrFireStation.com readers and commenters over the past year!
What other stories made a big impact on your FIRE journey in 2017?
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