The 2018 tax filing season is upon us and the IRS is once again open for business. This is the first year taxpayers will see the effects of the 2017 Tax Cuts and Jobs Act. In addition, on January 18, 2019, the IRS published final regulations and three related pieces of guidance on application of the pass-through tax break. In a nutshell, the regulations provide clarity on what type of businesses and investments qualify for the pass-through tax break.

Markets will be listening keenly to commentary from the Federal Reserve and the Federal Open Market Committee to determine the direction of interest rates for 2019.

As we sit here today, the government shutdown has reached its 32nd day. Prime Minister Theresa May’s plan to negotiate a withdrawal from the European Union was met with memorable defeat. And China’s economy is showing evidence of deceleration against the backdrop of tariffs.

Earnings growth slows dramatically, margin pressures build, tighter monetary policy and sector and stock selection will continue to focus on industries and companies that should perform well late in this cycle.

The sharp declines experienced in the equity markets in the fourth quarter of 2018 brought reminders of the financial crisis to the fore.

In our view, the current environment does not necessarily point to further declines for the equity market in 2019.

The fourth quarter of 2018 proved to be one of the most difficult to navigate since the financial crisis. While the causes of the equity market pullback were fairly well articulated – tariffs, the Federal Reserve, mid-term elections, mixed economic data – the velocity at which investor sentiment deteriorated was surprising.

Last December I predicted the new Congress which started on January 3, 2019 would be gridlock plus. Well so far it is gridlock without the plus. The plus is my reference to a few policy areas that may attract bipartisan support despite the bitter budget battles in Washington.