We’ve seen a lot of optimism across industries in the last year thanks to huge U.S. stock market gains and expectations for lower corporate tax rates and infrastructure spending. But is this party winding down?
Now that some major tech stocks have stumbled and federal interest rates were raised once again, the stock market looks a little shaky. As an individual investor or a business owner, you may be wondering how to respond to market corrections.
In uncertain times, it’s best to focus on your own goals and try to keep emotions out of the equation. That is easier said than done, but here are some things to consider:
- Review short-term and long-term goals.
If you already have plans to purchase equipment or seek business financing this year, do it now before another interest rate increase. As the dollar strengthens, focus on lowering your debt and shoring up liquid assets. Build in new reserves from any recent spending. Also, make sure your strategic plan is still on track, including the timing of M&A or leadership transitions.
If you don’t have plans for owner or leader transitions for another 10 or 20 years, it’s often best to stay the course with personal as well as business investments. However, there are usually opportunities to increase individual investments in international funds to balance out any shaky US investments. You could also consider changing your investment risk profile to be less aggressive.
- Invest in tax planning.
Too often, business owners wait until the end of the quarter (or year!) to consider how their tax position can be improved. With the new Tax and Jobs Act of 2017, it’s important for every business owner to understand how and why their tax position may change for entities as well as for personal taxation. Pass-through entities are especially in need of planning this year so that owners understand and manage the impact of new laws.
- Focus on what you can control.
In addition to monthly tax planning and review, make sure your accounting functions are reviewed for risks and opportunities. Focus on getting accounts receivables up to date and review credit agreements with customers. Review and update worker categorization and compliance with state wage and hour and sick leave laws. Assess risk with regard to fraud and data security.
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