Since the summer, Donald Trump’s tax reform has edged closer to reality. Indeed, next week the bill hits the Senate, where Republicans hope their wafer-thin 2-person majority will be enough to pass a vote of support. Back in November last year, when Trump won election, there was much hope pined on this fiscal re-balance – and in some ways, this is well founded. The US has some of the highest corporate tax rates in the world and aggressive cuts could well engender a revival in investment. However, there is another side to this coin. In order, to be long-run deficit neutral, the plan envisages large income tax hikes. And here lies the rub. These increases are initially offset by a package of temporary tax breaks. This is to say, the Republican’s plan a very 21st century solution; stimulate now and let someone worry about the cheque in the future.
Of course, in the case of the US, with a market near all-time high valuations and after one of the longest periods of economic expansion in history, it’s easy to be a hater. However, for now, economic growth is “picture perfect” with good momentum and low inflation keeping interest rates low and the relative appeal of equities high.
US crude prices hit a 2-year high last week as a leak in South Dakota led to the shutdown of the TransCanada Keystone pipeline. OPEC meet on Thursday when an extension of production cuts could be announced.DOWNLOAD THE FULL ARTICLE View All Global Market Updates
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