The S&P 500 maintains setting new record highs, we’re on the cusp of a major tax reform, and the economy is showing symptoms of perking up. Pessimists fret that we’re in another bubble that could pop at any time, while optimists believe the overall economy has lots of upside potential. I’m still in the last-mentioned camp, though I do acknowledge that it is difficult to find much that is cheap nowadays.

The S&P 500 is up about 24%, because the week before Trump gained last year’s election. Half of that gain is due to increased earnings on continuing procedures, as the other half is due to a growth in the multiple the market is willing to pay for a dollar’s worthy of of those revenues (i.e., PE ratios).

0.33%), implying a significant upsurge in real growth expectations but only a moderate rise in inflation expectations. Both the bond and the currency markets have thus undergone some significant price adjustments that are consistent with an improved economic outlook. Investors expect more development (as observed in rising real yields) and rising after-tax earnings (as evidenced by higher PE ratios). So: is the marketplace now pricing in an economic boom because of the likely passage of Trump’s taxes reform? Or is the marketplace just prices in the boost to future after-tax revenue that would result from a sizeable reduction in corporate taxes (from 35% to 20%)?

  • Business Scenario Preparations
  • 3 infections of all kind (yeast infection)
  • Reduction of employers absenteeism and turnover,
  • To understand the existing and potential changes taking place
  • Earning Potential
  • Do the math
  • Remain relaxed, cool, and collected whatever the circumstances

The way I read the market tea leaves, the market has little doubt that tax reform shall move, and that it will subsequently boost after-tax corporate and business income. But as yet I see no convincing evidence that the market is pricing in a considerable increase in financial growth rates-almost certainly not of the magnitude that your Republicans are touting (i.e., 3% or more).

So we’re confronted with a mixed bag of market goals: very good news for profits and equity investors, however, not much reason to cheer for the man on the street. That’s lacking the forest for the trees. Beyond the Republican booster community and supply-side economists, I see very few who expect real GDP development to go up significantly in coming years.

Left-leaning commentators claim that the taxes reform being forced is very unlikely to do anything beyond lining the pouches of big business and the rich. A year ago, As I argued, the only good thing about the American Recovery and Reinvestment Act of 2009 was that it offered as a lab experiment to test the value of the government spending multiplier. ARRA boosters argued that it would kick-start the recovery and deliver strong growth for years to come.

Unfortunately, the full total results were the precise contrary of what was expected by the Keynesians. Because the ARRA was all about income redistribution. Fully 63% of the “stimulus” spending was income redistribution in disguise (i.e., tax benefits and entitlements). 840 billion allocated to “stimulus” was essentially income redistribution. 65.5 billion-went for transportation and infrastructure (i.e., the “shovel-ready” projects that would put American back to work). Not a dime visited increase anyone’s incentive to work harder or spend more.

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