Why tax cuts won’t ‘make or break’ stock-market rally

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Why tax cuts won’t ‘make or break’ stock-market rally


Nomura lowers odds of ‘comprehensive reform’ but still sees 60% chance of ‘simple tax cuts’

The president and congressional Republicans took a few victory laps after unveiling a long-awaited tax-cut plan Thursday, but investors and analysts argue that it’s far too early to pop the champagne corks.

“That they have some terms on the table is a step in the right direction, but other than repatriation and a reduction in corporate taxes, everything else is up for negotiation,” said Bob Doll, chief equity strategist at Nuveen Asset Management, in a phone interview Friday. “I think the market is saying, ‘they’re making progress, but I want to see the final bill before I do anything.’”

The House plan would cut the corporate tax rate to 20% from 35%. It also includes a lower, but mandatory, tax on offshore earnings designed to encourage companies to bring home a chunk of the more than $1.3 trillion they’re estimated to have parked overseas.

On the individual side, the plan would compress the number of income tax brackets and fully repeal the estate tax by 2024.

See: Here are the winners and losers of the tax plan, by income bracket

Stocks put in a mixed performance Thursday in the wake of the unveiling. On Friday, the S&P 500 SPX, +0.31% Dow industrials DJIA, +0.10% and Nasdaq CompositeCOMP, +0.74%  all ticked up to record closes following another round of strong corporate earnings and a strong reading from a gauge of service-sector activity.

Meanwhile, the rollout saw a mixed reception from business groups, drawing criticism…Read More

Lakeem Khodra
Lakeem Khodra
News Writer/Contributor at Tyranny News @lakeemk

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