US election and fiscal cliff: the impact on yachting
As the US 2012 election results sink in, the superyacht industry will be questioning how the Obama victory and impending fiscal cliff might affect the spending patterns of its clients, the ultra wealthy. …
As the US 2012 election results sink in to those not only around the country, but also around the world, many are wondering how the Obama victory this week may or may not affect their sector. With the business of superyachts driven by the desires of those who can afford to buy and enjoy them, we as an industry are most likely to be affected by any changes to spending habits of the wealthiest individuals.
Putting aside possible barriers to small- and medium-business operation and taxation itself, it seems that the biggest impact on superyachting will therefore originate from how this affects the pocket books of the wealthy and their comfort in spending significant sums on luxury items such as superyachts.
Brokerage and shipyard sources at recent yacht shows said that, no matter what the result of the election, once it is over, those who can afford a superyacht are more likely to spend their money than in the weeks and months of uncertainty in the lead up to the actual event.
The day after the election, the financial markets took a significant beating, with the Dow Jones and Standard & Poor 500 down 2.0 per cent and 2.4 per cent respectively at the day’s close of trading, and Nasdaq down 2.5 per cent. Many media have blamed the election result as a root cause of this, citing the increased rift between Wall Street and the Obama administration as a factor.
However, the Wall Street Journal has warned against knee-jerk reaction and excessive concern about what this could mean for the coming years. Mark Hulbert of MarketWatch WSJ commented on Wednesday that it is common for post-election-day performance to be misleading about what the next four years has in store. And there are macroeconomic forces at work with Wall Street fluctuations, too. Financial rumblings in Europe as the European Central Bank president Mario Draghy commented that Germany is being impacted by the Eurozone crisis are surely affecting the US indices as much as concern for US politics.
But will these initial and ongoing fluctuations have an effect on spending habits of the ultra wealthy in the long term? Lyon Polk of the Polk Wealth Management Group in New York commented that, as long as his clients’ assets are allocated in a way that is consistent with their risk tolerance and investment goals, then they tend not to focus on daily market movements.
The greatest concern for his clients at present is that they are prepared for the upcoming changes in tax, known by many as the ‘fiscal cliff’, which sees the end of the Bush era tax cuts on 1 Jan 2013. In the lead up to the election, the Democratic position was hard on the highest-income earners, and many expect it is unlikely there will be extensions of the tax cuts for this demographic, but Polk remained positive that all will not be doom and gloom when the final decisions are made.
“We are hearing the same concerns around the fiscal cliff as we did prior to the election,” continued Polk. “Now that we know the election results we can better prepare for its potential impact. Our expectation is that a compromise will be reached to avoid the full impact of the fiscal cliff on the economy.”
In fact, Deborah Montaperto, a partner at the Polk Wealth Management Group, feels that rather than focusing on the effect of the election result on the spending of the ultra wealthy, along with interest and tax implications, there has been a longer-term cultural shift in America that is more important:
“Our view is that the political landscape is part of an overall cultural shift in America. Although there almost certainly will be effects on taxes and interest rates as a result of the election, the truth is that the individuals involved in purchasing yachts are almost always wealthy enough to be somewhat insulated from these effects on their income. There has been a shift however in the views around deploying those assets; and as the culture in America has increasingly valued philanthropy and socially conscious endeavors in the recent decade, the dispersion of the super wealth’s assets has shifted. While they still may purchase a major luxury item such as a yacht there tends to be less ostentatiousness about that purchase in lieu of an increased focus on the philanthropic or socially conscious activities of a family,” said Montaperto.
The coming weeks and months will be critical for many in the yachting business. Slower brokerage sales and a relatively small number of new construction contract signings in the US have put increased pressure on many companies in 2012. But with the psychological barrier of the election passed, those in the market to buy a superyacht will now be able to take stock of what the economic and taxation landscape might look like to them in 2013 and make firm decisions one way or another.
Read more about how the spending patterns of the ultra wealthy are affecting yachting in 'Show Me The Money' in The Superyacht Report Issue 138.
Related links
The Polk Wealth Management Group website
Putting aside possible barriers to small- and medium-business operation and taxation itself, it seems that the biggest impact on superyachting will therefore originate from how this affects the pocket books of the wealthy and their comfort in spending significant sums on luxury items such as superyachts.
Brokerage and shipyard sources at recent yacht shows said that, no matter what the result of the election, once it is over, those who can afford a superyacht are more likely to spend their money than in the weeks and months of uncertainty in the lead up to the actual event.
The day after the election, the financial markets took a significant beating, with the Dow Jones and Standard & Poor 500 down 2.0 per cent and 2.4 per cent respectively at the day’s close of trading, and Nasdaq down 2.5 per cent. Many media have blamed the election result as a root cause of this, citing the increased rift between Wall Street and the Obama administration as a factor.
Poor performances on Wall St on Wednesday are not necessarily a sign
of impending doom for the next four years, said the WSJ MarketWatch
of impending doom for the next four years, said the WSJ MarketWatch
However, the Wall Street Journal has warned against knee-jerk reaction and excessive concern about what this could mean for the coming years. Mark Hulbert of MarketWatch WSJ commented on Wednesday that it is common for post-election-day performance to be misleading about what the next four years has in store. And there are macroeconomic forces at work with Wall Street fluctuations, too. Financial rumblings in Europe as the European Central Bank president Mario Draghy commented that Germany is being impacted by the Eurozone crisis are surely affecting the US indices as much as concern for US politics.
But will these initial and ongoing fluctuations have an effect on spending habits of the ultra wealthy in the long term? Lyon Polk of the Polk Wealth Management Group in New York commented that, as long as his clients’ assets are allocated in a way that is consistent with their risk tolerance and investment goals, then they tend not to focus on daily market movements.
The greatest concern for his clients at present is that they are prepared for the upcoming changes in tax, known by many as the ‘fiscal cliff’, which sees the end of the Bush era tax cuts on 1 Jan 2013. In the lead up to the election, the Democratic position was hard on the highest-income earners, and many expect it is unlikely there will be extensions of the tax cuts for this demographic, but Polk remained positive that all will not be doom and gloom when the final decisions are made.
“We are hearing the same concerns around the fiscal cliff as we did prior to the election,” continued Polk. “Now that we know the election results we can better prepare for its potential impact. Our expectation is that a compromise will be reached to avoid the full impact of the fiscal cliff on the economy.”
In fact, Deborah Montaperto, a partner at the Polk Wealth Management Group, feels that rather than focusing on the effect of the election result on the spending of the ultra wealthy, along with interest and tax implications, there has been a longer-term cultural shift in America that is more important:
“Our view is that the political landscape is part of an overall cultural shift in America. Although there almost certainly will be effects on taxes and interest rates as a result of the election, the truth is that the individuals involved in purchasing yachts are almost always wealthy enough to be somewhat insulated from these effects on their income. There has been a shift however in the views around deploying those assets; and as the culture in America has increasingly valued philanthropy and socially conscious endeavors in the recent decade, the dispersion of the super wealth’s assets has shifted. While they still may purchase a major luxury item such as a yacht there tends to be less ostentatiousness about that purchase in lieu of an increased focus on the philanthropic or socially conscious activities of a family,” said Montaperto.
The coming weeks and months will be critical for many in the yachting business. Slower brokerage sales and a relatively small number of new construction contract signings in the US have put increased pressure on many companies in 2012. But with the psychological barrier of the election passed, those in the market to buy a superyacht will now be able to take stock of what the economic and taxation landscape might look like to them in 2013 and make firm decisions one way or another.
Read more about how the spending patterns of the ultra wealthy are affecting yachting in 'Show Me The Money' in The Superyacht Report Issue 138.
Related links
The Polk Wealth Management Group website
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