On Thursday, stocks went from a gain to a loss as some investors wondered if the market would finally fall. Alas, the market righted the ship and it closed about flat. The biggest down days we’ve seen are when the market gives back some of its gains, but finishes close to even. The market has not had a substantial decline in the past few quarters. As I said, This is the Wayne Gretzky of stock markets because he owns almost every hockey record and this bull market owns many records.
One more record you can add is the streak without one day being down 0.6% or more. As you can see from the chart below, going back to 1945, the current streak of 96 trading days without a 0.6% decline or more is by far the longest. One streak the current market doesn’t yet have is the record for trading days without a 1% decline. The current streak is 108 days. The longest streak lasted 184 days in 1963. There wasn’t a sharp decline after that one ended, so it’s not a given that the end of this streak means disaster.
Tax Cut Effect
Most analysts and investors are still trying to figure out the effect of the tax cut. We’ll start to see how the tax cut boosted the overall economy in the next couple months when more data points come out. The optimists say the tax cut will put more money in the hands of the consumer and the overseas capital will be repatriated into the American economy, creating new jobs and boosting wages. The pessimists worry about the state and local taxes which won’t count as a deduction against federal taxes. I think these states will lower their taxes in the next few years to stay competitive, thus mitigating that negative effect. The pessimists also worry about the corporate windfall being spent on buybacks. To me, this isn’t an issue because the money still flows through the economy.
The table below shows the difference in take home pay people in each income category will see starting in February. As you can see, each category has a benefit. While those making $10,000 only see a $12 monthly improvement, that’s a big deal for low income earners. When you look at the top income earners, those who are married have a much bigger benefit than those who are single. The stocks to buy on this improvement in married wealthy families’ income could be the furniture names such as Ethan Allan, Wayfair, and Restoration Hardware.
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