With the Republicans winning control of the Senate in the midterm elections, the focus of Congress is expected to change, especially considering that the party also strengthened its control of the House of Representatives. Needless to say, many Republicans campaigned on a pro-economic growth platform that calls for tax reform, government spending cuts, and changes to regulations that would make the country more business friendly.
In the years following the subprime mortgage crisis, mutual fund investors have enjoyed the equivalent of a tax holiday. Most funds have had multiple years of capital losses on their books that they have used to offset income and gains, thereby greatly reducing or eliminating the need to make taxable distributions.
Fears over slowing global economic growth, geopolitical turmoil and the potential for the Federal Reserve to raise interest rates have taken equity investors on a rollercoaster ride during the past few months. Indeed, in some days, broad-based equity indexes have declined more than 2% as pundits have opined that Europe may be on the verge of a recession. The rise of the Islamic State in Iraq and Syria combined with concerns over Russia’s annexation of Crimea and resulting sanctions against the country have also weakened investor sentiment.