Illusive tax reconciliations are unlikely to be any sort of panacea for the nervous money managers of Wall Street; but are essential for the markets; merely to have them hold together (not necessarily advance much) after the event. There is however a bigger risk – two of them, actually.

With a presumption that FIFO will not be a required for Capital Gains, that takes us to the next issue. That’s a concern (leaked if valid by Goldman in the final moments of today’s trading session) that Corporate tax rates, cut purportedly to the 21% level (fine); won’t be effective until 2019 (not fine).
 

I’ve previously opined that if they mix this up, and generate the really small individual tax cuts to 2018 and delay corporate cuts to 2019; the market’s not going to be pleased. That may not be the case; but that’s the worry we saw expressed in the day’s final moments; even though we thought stocks would do no better than up-and-then-on-hold ahead of tomorrow’s Fed rate decision.

That rate decision is expected to be 25 bp higher on the Funs rate; and we suspect the market is ready to absorb that with some momentary shuffling. If however the Fed moves 50 bp higher, that’s likely a different story; so it’s likely to invite some volatility. Prepare for ‘trench warfare’ especially if that happens.

Bottom line: for the moment that’s really where things stand and we won’t elaborate much tonight (in harmony with our pledge to shorten most of the evening reports unless there’s a significant topic to discuss).

There’s also continued discussion that this is not a really effective tax plan; but I think we all already grasped that it was fiddling with what we had with rate changes; and not genuine reform or simplification as many hoped for.

Various studies have shown that revenue losses are going to overwhelm a slew of purported savings measures; and that might be partially ‘why’ (if so for that matter) the story of a delay in corporate cuts to 2019 is circulating.

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