What Corporate Tax Reform Means for You

Corporate tax reform clearly drove the stock market to new all-time highs yesterday. Both the S&P 500 and Dow surged 0.5% and 0.9%, respectively, in morning trading before settling down yesterday afternoon. The surge came on the heels of good news out of Washington D.C., as the Trump administration moved one step closer to having its corporate tax reform passed. In today’s blog, we’ll take a closer look at what this means for you…

While corporate tax reform hit a "snag" last Thursday, the U.S. Senate passed its version of tax reform by a slim 51 to 49 vote over the weekend. The next step will be the reconciliation process with the House. The House and the Senate have different versions of the tax reform, and these differences will need to be settled before it can become a new law. After that, President Trump will be able to sign the bill into law in the upcoming days.

Anticipation of corporate tax reform has been a boon to the stock market in recent days, especially for many beaten-up, domestic companies that have been lagging the S&P 500 this year. Other stocks, however, have not participated in the recent stock market rally.

Profit taking has enveloped the technology sector. Wall Street grew concerned last week that Apple (AAPL) would not be able to clear its shelves of the new iPhone X, despite selling about six million over the long holiday shopping weekend. Weaker-than-expected forecasts for the iPhone X sales triggered a "tech wreck" last week, and the technology sector has yet to recover fully.

In the meantime, it’s important to note that money is not leaving the stock market. Rather, it’s merely being reshuffled. Rotational corrections are very healthy for the stock market, since money is not leaving but rather sloshing from one side of the bathtub to the other.

We also need to remember that December is a particularly strong month for the stock market. In fact, the folks at Bespoke deem December "the most wonderful time of the year." And for good reason: In the past 100 years, the Dow has posted gains 74% of the time, and it has averaged a 1.55% gain. The S&P 500 has posted an average 1.76% gain in December over the past 33 years.

I expect this December to be no different, and I encourage you to stay tuned into this blog throughout the month. I’ll continue revealing my stock market insights as we head into the Holidays.

Until tomorrow,

Louis Navellier

Louis Navellier

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