Many Americans are wondering how the President Elect Trump tax plan will affect the type of mutual funds and ETF’s that they buy going into 2017. One of the items bandied about in a serious way by President Elect Trump is to bring in trillions and trillions of dollars by repatriating money from companies’ accumulated offshore earnings through a one-time 10% tax to bring those dollars back to the United States. This tax is a substantial reduction from the current 35%, which would mean a massive tax save to large corporations.
The thought process behind this strategy is to get some 2.6 trillion dollars (source Joint Committee On Taxation) back into America. If that money is returned into the hands of many large U.S. Multinational corporations, the philosophy is that jobs would follow quickly behind this influx of money and perhaps a throwback to the heydays of manufacturing.
However, the capital influx could heavily influence where you invest your money into 2017 amidst speculation on where the market will go having hit all-time highs last week.
Large companies such as Apple already have a ton of cash, so what would this really mean to investors? There are six things that large companies can do with this cash.
- Boost the dividends of their investors
- Buyback shares in their corporation
- Aggressively seek mergers and acquisition activity
- Hire more people
- Invest heavily into research and development
- Let the money accumulate in short term investments (especially as interest rates rise)
This means if the President Elect Trump tax plan passes and the majority of these dollars are repatriated back to the United States, there are two types of funds that can benefit immensely from this tax strategy. Remember, that owning stocks are dependent on each person’s own situation and you should have a lengthy time frame to own these.
- Large Divided Paying Technology Companies – there are several that could both benefit from this upcoming situation.
- Large Multinational Corporation Dividend Paying Companies – there are some that should get a huge boost if this strategy is completed in 2017.
Under President Elect Trump’s tax plan, repatriating could be making a happy 2017 for all of us.