Tax cuts will power stocks in 2018

Having been active in the financial markets for nearly 30 years, I have experienced the natural market volatility investors learn to endure and turn to one’s advantage.

Still, there are certain things which make me sit up and pay attention.  

The other day, I noticed President Trump taking credit for the stock market performance over the last year.


Robust Earnings

In my opinion, the underlying causes are elsewhere.

First, corporate earnings are very strong.

And even with the US Federal Reserve having just raised interest rates 25 basis points, and indicating they will do so again three more times in 2018, the economy is trending nicely upward with 3%-plus growth.

Tax Cuts

Now, we have corporate tax cuts headed down the pike.  

In my opinion, a near 40% reduction in corporate tax rates, as well as the ability to repatriate cash from overseas subsidiaries, are major changes and will dramatically help the competitiveness of our country.   

Doubling the standard deduction amount is going to help a lot of families put more money directly in their pocket as their tax liabilities head lower, in most cases.

Game Changer

Democrats can argue about the fairness of this, and right now the general public isn’t very optimistic about this piece of legislation.

But in my view, and on many different levels, the tax cut is potentially a very big deal.  

President Trump will deserve credit for signing it, but in my opinion the real mover behind it is House GOP Speaker Paul Ryan, who has been its architect for nearly a decade.  

The bottom line: tax cuts, a strong economy, and good earnings growth may push markets higher in my view.

Photo Credit: Sarah Ackerman via Flickr Creative Commons