Sunday, February 19, 2017

"Good News, The Tax Crash Is Already Priced In"

The second largest market crash in forty years preceded a corporate tax cut. The largest market crash in forty years was preceded by small cap outperformance...

Both risk factors are now in play...

"The S&P then infamously crashed in October of 1987, for a variety of reasons, one of which, Barclays suggests, was the rapid pricing in of the Reagan tax cuts."

the "S&P 500 has returned 10% since Election Day while consensus 2017E adjusted earnings have been lowered by 1%"

Regarding small cap outperformance:

The average effective tax rate among S&P companies that had posted calendar fourth-quarter results as of Friday was 24.11 percent — well below the current corporate rate of 35 percent

small-cap stocks will be the biggest beneficiaries from a reduction in corporate taxes and regulations.

Rapid pricing in of tax cuts visualized: