Tax Alert: Your Weekly Update - OECD forecasts 3% growth for 2016

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Weekly Market Recap

The Organization for Economic Cooperation and Development (OECD) published their latest forecasts for the global economy this week. The OECD expects global growth in 2016 to be 3%; the same level as 2015. They view the global economy as "stuck in a low growth trap".

The OECD called for coordinated actions beyond low interest rates, such as structural reforms and public investment to boost growth. They also warned of the negative consequences for growth should the UK vote to leave the EU in a referendum being held later this month. In other economic news, the US saw strong consumer spending growth in April, the highest rate of monthly increase since August 2009. However, the US economy added fewer jobs in May than many expected.

As you consider your savings strategy, one of the most valuable things to have on your side as an investor is what Albert Einstein called "the eighth wonder of the world" - the impact of compounding returns over time.

Compounding is when the earnings on your savings are reinvested, giving you the potential to earn more money over time. As you save, you earn money on your original savings, but, importantly, also any amount that your savings has grown by beyond your initial investment. As time progresses, the impact of compounding with a positive rate of return can become powerful.

Saving early in one's lifetime and saving over longer periods can improve the impact of compounding. For example, if you owned a risk-free bond that earned a 2% rate of return over 10 years it creates a 22% total gain over the decade, but over 40 years that same 2% annual rate of return becomes a total 120% gain from the start to the end of the 40 years. Adding another 30 years of saving creates a final nest egg over 5 times greater. This is one of the reasons why we believe starting to save early for big life goals, such as your retirement, is an intelligent strategy.

Notes:
OECD Forecasts
http://www.oecd.org/newsroom/global-economy-stuck-in-low-growth-trap-policymakers-need-to-act-to-keep-promises.htm

Disclaimer:
The views expressed are for informational purposes only and are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities by FutureAdvisor. All expressions of opinion are subject to change without notice in reaction to shifting market, economic political conditions, and as subsequent conditions vary. The investment strategies mentioned are not personalized to your financial circumstances or investment objectives, and differences in account size, the timing of transactions and market conditions prevailing at the time of investment may lead to different results. This material may contain "forward-looking statements": information that is not purely historical in nature. Clients may lose money. Past performance is not indicative of future results. Investments in securities involve the risk of loss. Any tax strategies discussed should not be interpreted as tax advice and do not represent in any manner that the tax consequences detailed will be obtained. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

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