The S&P 500 and Dow surged to new all-time highs yesterday morning on hopes that the tax reform bill will be passed later this week. The Senate is scheduled to vote on the tax bill today, while President Trump is anticipated to sign the bill into law by the end of this week. The tax reform bill will be a boon for the stock market, as it will ignite corporate profits and free up more cash for stock buybacks and quarterly dividend payments. Let’s take a look at what this means for you right now…
Interestingly, companies have already been increasing their stock buybacks and boosting their dividend payments. Since the third quarter, stock buybacks increased for six of the 11 S&P 500 sectors—and in the third quarter alone, buybacks rose 15.1% year-over-year to $129.2 billion.
S&P 500 companies also paid $105.4 billion in dividends in the third quarter. Overall, the combination of stock buybacks and dividends in the S&P 500 in the third quarter was the strongest in six quarters! I look for these figures to continue to increase in 2018 if the tax reform bill is passed this week.
That means, thanks in part to excitement surrounding the tax reform bill, the recent rotational correction and daily stock market gyrations are finally dissipating. In fact, the S&P 500 climbed about 1.2% higher last week.
With the Christmas holiday less than a week away, I look for the recent stock market strength to continue. In my opinion, the last week of December will be the best time to add new money to the stock market before Wall Street refocuses on earnings and the positive analyst earnings revisions that I anticipate in early January.
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