Will Tax Reform Wind Up A Big Turkey?

Monday, November 20, 2017

In this shortened trading week of Thanksgiving, much talk and speculation will be on whether or not the Senate can get its tax reform bill passed, and then whether it can be reconciled with the House version that has already won the vote. Because the Senate will not be deciding prior to this Thursday’s holiday, expect to hear plenty of analysis from both pro- and anti-tax cut perspectives, but don’t look for any certainty either way. At least not yet.

That said, we’ll still need to fill the columns of our articles, and passage of tax reform — either before calendar 2017 is out or after — stands to help market indexes climb even higher, as windfall corporate tax cuts look to directly help shareholders of publicly traded companies above everyone else, via share buybacks and increases to dividend yields. But deficit hawks continually point to a $1.5 trillion hole being blown through our country’s debt; tax reformers’ essential “trickle down” philosophy that more capital freed up will help companies hire more workers and thereby grow the economy enough to make up for any near-term economic losses are, as always, an article of faith.

Expect weaker trading volumes as market participants make plans to visit family and friends this week. But the question will remain once we’ve all returned back to the office: can the stock market get back to its bullish stance without tax reform reconciliation in the U.S. Congress? And if it can, where would that growth come from?

Perhaps we’ve seen market trepidation in the past couple weeks because failure of passing tax cuts may result in a market selloff of notable proportion. Also, with 2017 having been such a rampant success for many shareholders, booking profits before the end of the year will continue to provide at least a mild headwind through the end of the year.

Bitcoin Ramps Above $8000

Meanwhile, the world’s most famous cryptocurrency, bitcoin, is up 650% year to date — +17% last week alone. As its acceptance grows across the globe and with certain key retailers and market exchanges, we now begin to hear the clearing of naysayers’ throats. These include famed derivatives trader Thomas Peterffy, who writes in the Wall Street Journal that a futures exchange focused on the cryptocurrency may lead to a financial crisis down the road.

The CME Group (NASDAQ:CME) , in particular, is openly discussing a bitcoin platform as early as next month, where trading halts might be implemented to smooth out some of its inherent volatility. Peterffy argues that the lion’s share of bitcoin interest will occur at weaker clearing houses who don’t have much to lose anyway. So the lack of support at some level of bitcoin — which, remember, is up nearly 700% this year alone — might be how unsuspecting investors might be one day left holding the bag.

Mark Vickery
Senior Editor

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