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…

Hanging in

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | September 20, 2013

Recent retail sales data are well below expectations and probably an indication that consumers have become more cautious about spending. Financial conditions matter greatly, and the recent tightening is likely having some impact on housing activity and consumer attitudes. Spending follows wages and it will be difficult for retail spending to gain much traction with the tie to shallow compensation trends. The best one can say about consumer spe…

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…

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…

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 market takes center stage

Zach Pandl, Portfolio Manager and Strategist | October 15, 2013

…en, March 2013). Labor market issues have long taken a central role in Yellen’s career. As an academic economist her most well-known research focused on an idea called the “efficiency wage theory”, which argues that firms set wages in an effort to promote worker morale and thereby improve productivity. For the economy as a whole this theory helps explain involuntary unemployment, because efficiency considerations move wages away from the market e…