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Wall Street May Be Hanging on but Could Tax Reform Derail Everything?

September 29, 2017
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There has been something of a cooldown in the markets lately. After weeks on consecutive runups, some big name such as Apple, Netflix and Toshiba have posted weaker numbers this month which has some analysts worried. Despite those worries, the markets are holding rather steady. Marketwatch says that:

U.S. stocks were little changed on Friday, with investors finding few reasons to keep pushing shares higher following gains that have lifted equities for both the month and the quarter, however the move was enough to take both the S&P 500 and the Russell 2000 to intraday records.

This shift in mentality to one of maintaining rather than growing could be thrown for a loop if the GOP cannot get its act together for tax reform. Trump’s proposed tax reform would cut corporate taxes significantly, potentially boosting the market with new capital. The issue is that, according to CNBC, they may not be able to:

The health-care debate exposed contradictions between GOP promises to cut costs and the reality that their proposals would leave millions fewer Americans with health insurance. Republicans have the same vulnerability on tax reform. President Donald Trump insists middle-class Americans, but not the wealthy, will benefit. That’s not true. Not only does the plan propose a top rate cut, it would eliminate the alternative minimum tax as well as the estate tax — which applies only to multimillion dollar inheritances.

The bottom line is that while this bill may lead to an economic boost (although CNBC‘s article questions that as well) it will be a much tougher sell to average Americans. Another failure on a major economic platform could derail the markets with uncertainty.

Investors should be considering the possibility that such an outcome is realistic. After numerous failures on healthcare, the government has more pressure on it than ever before to perform and maintain the high performance of the markets. Just be wary that the pressure may not translate into success and to adapt your investments accordingly.

To read Marketwatch’s update on this morning’s markets, click here.

To read CNBC’s article on the dangers facing Trump’s efforts at tax reform, click here.

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