Trump’s repeated failure in getting his pro-business policies passed made investors cautious that markets might witness a crash in the absence of such a catalyst for growth.
The Senate Finance Committee revealed a version of the tax plan. The Senate decided not to implement the corporate tax slab of 20% before 2019. While Trump wanted to abolish estate-tax exemption, the Senate has actually doubled it.
Moreover, the Senate’s version revokes completely the deduction for state and local taxes. Although, in order for Trump to finally sign the bill into law both the versions of the tax plan need to be on a common ground.
Meanwhile, U.S. stocks continue to be overvalued. Though the major indexes have rallied in the recent past amid upbeat corporate earnings, the gains have been impulsive. Under such uncertainties, we suggest that one must place their bets on high-yield mutual funds instead, which seem prudent investments.
Has Trump Really Caused a Stir in Markets?
Immediately after Trump’s election, when parts of America were absorbing the shock of what they had witnessed, markets went berserk. Well, this hysteria that the markets experienced had much to do with Trump-trade. His campaign trail promised of tax-reforms, the totally unnecessary repealing of Obamacare and his claim to devote $1 trillion toward improving the infrastructure of the United States.
Quite interestingly, the question on every investor’s mind is: what has Trump done in a year of his service? Let’s start with tax reforms. The very prospect of a tax reform was the primary catalyst to such a stellar rally in the markets. It pushed the Dow to surpass the psychological 23,000 mark in under a year of his tenure. Trump’s tax reform sought to reduce the corporate tax rate from 35% to 15% initially. Now, the administration has presented a revised plan to reduce the corporate tax to 20%. The suggested rate is still lower than 35% but throughout his campaign trail, Trump kept harping on the fact the tax rates would be slashed to 15%. Now that the administration chooses to raise it to 20% shows that Trump has divulged from his promises.
However, the President and his aides have worked toward making the plan a success with the House of Representatives even passing the Tax Cuts and Jobs Act under which they’ve revealed the details of the plans. Whether or not it will be signed into law remains a big question. One is forced to believe that this would be an uphill task for Trump, given his history of failure on numerous occasions to revoke the Affordable Care Act. The administration also announced that it planned to terminate subsidies worth billions of dollars to health insurers under the Affordable Care Act, a move touted to take Trump a step closer to repealing Obamacare. He had reasoned that there was no law which stated that subsidies and funds have to be earmarked for health insurers under Obamacare. Such plans fizzed out once a bipartisan agreement was signed on healthcare which meant that he could not cut the subsidies. It is therefore highly unlikely that we would see a reform in taxes anytime soon.
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