Trump Tax Cuts Seen Boosting Earnings by 20% Next Year
$DIA, $SPY, $QQQ, $VXX
Some analysts are raising earnings forecast for Y 2017 expecting US President Donald Trump to favor a more business friendly environment than Barack Hussein Obama.
The combination of a Republican in the White House and a Republican Congress is seen by investors to mean less regulation, lower taxes and supportive of growth.
“Love it or hate it, it’s going to be quite dramatic and a government of deal makers as opposed to a government of shall we say ‘community organizers’ is going to be a radically different kind of regime. And, I think the market likes it,” economist Edward Yardeni in an interview Tuesday.
Mr. Yardeni said stocks are not yet overvalued, calling it one of the biggest misconceptions which could drive the US stock market further North
“I now think that earnings instead of being up 8%, it could be up closer to 20%. That’s the kind of impact the substantial tax cuts could have,” said Mr. Yardeni.
“It may not happen until the summer or fall. The question is: Will it be retroactive? I think it will be retroactive,” he added.
The historical gains could just be beginning.
“As soon as Donald Trump won, the markets started to rethink whether he was bullish or bearish, and very quickly concluded he was Bullish because of his economic program. Not only that, he came in with a majority in both houses of Congress which increases the chances they’ll get his tax cuts passed,” said Mr. Yardeni.
“I think it’s a good bet,” he said. “I think we should not underestimate how radical this change is going to be,” he said.
To make the most of potential market gains in Y 2017, he recommends stocks in the consumer discretionary and financial services areas.
“Financials have had a great move, but they were extremely disliked, hated even. And, they were big laggards,” he said.
“I think there is still more room in the financials. I could see the ten-year bond yield getting to three percent next year,” said Mr. Yardeni.
“A 3% bond yield certainly would indicate a stronger economy and that would mean the yield curve would continue to steepen. And a steepening yield curve is usually a sign of better growth and it’s great for the financials.”
It is all about positive earnings.
Tuesday, the major US stock market indexes finished at: DJIA +11.23 at 19945.17, NAS Comp +24.75 at 5487.44, S&P 500 +5.09 at 2268.88
Volume: Trade was Holiday thin with about 590-M/shares exchanged on the NYSE
- Russell 2000 +21.4% YTD
- DJIA +14.5% YTD
- S&P 500 +11.0% YTD
- NAS Comp +9.6% YTD
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Bullish (0.30)||Neutral (0.12)||Bullish (0.44)||Bullish (0.35)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Bullish (0.46)||Bullish (0.45)||Bullish (0.38)||Very Bullish (0.56)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Bullish (0.42)||Very Bullish (0.52)||Bullish (0.38)||Bullish (0.36)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Very Bearish (-0.66)||Very Bearish (-0.64)||Very Bearish (-0.67)||Very Bearish (-0.67)|