Perspectives Blog

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…y will need to compare the amount by which they cross the threshold to the amount of net investment income (NII). The surtax applies to the lesser of the amount over the threshold or the net investment income amount. Although wages and distributions from IRAs and qualified plans (among other things) are NOT counted as net investment income, they can expose a greater amount of net investment income to the 3.8% surtax by pushing more or all of NII…

Half-time report on the U.S. consumer

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | July 28, 2014

U.S. consumers have taken a more cautious attitude toward debt and been more selective about using it for discretionary purchases. With consumers using credit cards less and using debit cards much more, the supports for higher discretionary spending are keyed off income and wages and also employment. With low debt use and income growth holding back consumption and demand, households will require stronger job growth and real wage gains to accele…

U.S. rates – An intriguing six point three

Zach Pandl, Portfolio Manager and Strategist | June 9, 2014

…aturally there are competing opinions on this point. One view holds that while the unemployment rate matters at some level, Fed officials are focused on much broader measures of slack, and have perhaps put renewed emphasis on wages as well. For instance, a recent paper by economist Andrew Levin (previously Janet Yellen’s chief of staff) puts the degree of broad labor market slack at around 5.5 million full-time equivalent workers (see figures 1 a…

A tepid cyclical lift

Tom West, Director of Equity Research | April 28, 2014

Cyclical investment and discretionary spending are on track to deliver earnings growth of 7% in the S&P 500. Strength in some consumer durables appears more of a “wallet share” gain than a general lift due to recovering wages or a release of excess savings. Construction and energy are poised for another year of growth, while “enterprise” spending and investment in the tech sector remain challenged. The S&P 500 Index should grow earning…

Quality milestone in the European recovery story

March 17, 2014

…ntional monetary tools to prop up inflation and eventually drive growth in Europe. The eurozone would function more smoothly if the large gap in competitiveness between Germany and other major eurozone economies closes. Thus, wages need to rise in Germany and fall in the rest of Europe and thankfully this is happening, albeit slowly. Cultural and political factors in Germany provide a brake on wage growth, while German industry faces ever-present…

Labor markets in the new digital age

Columbia Management, Investment Team | April 14, 2014

…churn in the labor market is a normal response to the disruptive change inherent in innovation—killing some jobs but also creating new ones in the process. But the effects of the new machine age have put downward pressure on wages at the bottom and now middle-income workforce. A recent study by Oxford University economists Frey and Osborne* suggests 47% of U.S. jobs could be automated in the next 20 years, with less impact on those with a higher…

Income inequality, disinflation and profit growth – the role of globalization

March 10, 2014

…s-border arbitrage of unit labor costs have been taking place. Put simply, companies look across the globe to determine the locations from which they can manufacture their products at the lowest risk-adjusted cost. Of course, wages are only one component in the calculus as to where to locate. Integral to the calculation of the cost of doing business are concerns over governance (the cost of managing across multiple legal, regulatory, political, m…