Republicans in congress have drawn some serious media headlines – and some serious political ire from their opponents – with their recent tax reform bill, the Tax Cuts and Jobs Act. As commentators and journalist everywhere rush to cover the frenzied news surrounding Capitol Hill, businesses are starting the feel the results of tax reform, too.
So how exactly have US stock prices reacted to the passage of the Tax Cuts and Jobs Act, and are these results likely to stand the test of time? Are soaring prices or sinking fortunes indicative of broader economic change? A quick dive into the recently passed tax bill shows just how seriously many corporations – and their share prices – will benefit from it.
A $1.5 trillion package
The Tax Cuts and Jobs Act serves as tax relief worth some $1.5 trillion to the American economy, with some four out of five taxpayers expected to see their bills reduced in 2018. Broadly speaking, investors everywhere are seeing the reform as a huge boon to share prices, with some analyst going so far as to say that the S&P 500 could enjoy a surge of 25% thanks to the bill. With the US corporate tax rate being slashed from a strangling 35 to a healthier 21 percent, it’s no wonder many analysts expect company’s stocks to be soaring sooner rather than later.
The fact that some 80% of taxpayers will be receiving more money in their pocket in 2018, too, has many on Wall Street confident that consumers, whose confidence in the economy is at an all-time high, will be spending more. Still, while the tax cuts ushered in by the GOP-led reform efforts will be broadly distributed to most Americans, some will benefit more than others, and certain industries and companies in particular can expect to have a more roaring 2018 than others.
As far as who benefits the most from recent reform, many experts are backing companies like Target, AT&T (NYSE:T), and Wells Fargo (NYSE:WFC), the latter two of which have already announced increased wages and additional employee bonuses in the immediate aftermath of the Tax Cut and Jobs Act’s passage. As more corporations take advantage of the serious savings they’ll soon be enjoying and pass some of those extra dollars onto their employees, expect Wall Street analyst to be confident that more long-term investments will follow, too.
Comcast (NASDAQ:CMCSA), for instance, has announced that it expects to spend some $50 billion over the next five years alone to expand its IT infrastructure in the wake of the bill’s passage. Other companies are likely to follow in Comcast’s footsteps, too, and pump more money into long-term infrastructure investment plans that are long overdue. Thanks to the recent reform effort, virtually all companies in the S&P 500 could expect higher earnings next year, particularly in consumers continue to spend big during the holiday seasons. These boons combined paint a rosy picture for US share prices in the coming few years.
Tax hiccups? No problem
After the GOP’s failure to pass serious healthcare reform legislation earlier this year, many analysts on Wall Street were reasonably worried that the tax reform effort might fall through before reaching the finish line. After the republican-controlled House had to re-vote on the tax bill on Wednesday, too, following a minor provisional error in the legislation’s text, some were worried that legislators might encounter last-minute speed bumps. As the ongoing celebrations led by the president in the Rose Garden have shown, however, those concerns were seriously misplaced.
Now that the Tax Cuts and Jobs Act is on the way towards President Trump’s desk to be signed, investors everywhere can take a deep breath of relief and look forward towards a more profitable 2018. The S&P 500 has already climbed by more than 5 percent since mid-November in expectation of the bill’s passage, and future initiatives friendly to small businesses and corporations alike coming from the Congress and the White House should be expected. Already, the president’s twitter account and republican’s PR teams are spinning seriously positive headlines about the economy’s future.
As investors around the world prepare for the US market to be inundated with share buybacks and higher dividend payouts thanks to the GOP’s tax reform efforts, expect higher share prices buoyed by some serious confidence in the economy. While certain passages of the bill’s text, like the repealing of the individual mandate instated by the Affordable Care Act, are receiving a full-frontal bashing from some politicians on the Hill, most in the business world see the recent reform effort as long-overdue and seriously beneficial to American companies. Washington may be getting roiled by scandal after scandal in headlines, but when it comes to affecting US stock prices, the Tax Cuts and Jobs Act is delivering nothing but good news.