Small Cap Value Fund Fourth Quarter 2017

The Tax Cuts & Jobs Act was the big event in the fourth quarter. Newly competitive global tax rates should remove the disincentive to invest in the U.S. and repatriate $2 trillion of trapped cash. However, the earnings benefit is likely vastly overstated as most analysts assume all the tax savings drop to the bottom line. Excluding some tech monopolies, virtually all public companies are in fiercely competitive industries. Like any large cost, tax savings eventually will be partially reinvested or competed away in the form of lower prices or higher wages.

We continue to be optimistic on U.S. economic growth in 2018 as the removal of unnecessary regulation, tight credit spreads, and recent passage of tax cuts maintain recently energized small business confidence. This should most notably lead to accelerating capital investment. Additionally, consumer confidence is at a 13- year high. 81 percent of Households will get a tax cut going forward.