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Why BlackRock Thinks Tax Reform Has Already Been Factored into the Market

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BlackRock’s Kate Moore on tax reform

In a recent CNBC interview, BlackRock’s (BLK) Kate Moore said that she believes that tax reform has been already factored in the market (SPY) (QQQ). The rally in the market over the past eight months has shown that investor confidence has also improved across the economy.

The expectation for tax reform, infrastructure investment, and fiscal stimulus have all driven market sentiments (IWM) in recent months. Moore believes that this strong rally has been counting on phenomenal tax reform.

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How tax reform could benefit the economy

The Trump administration’s tax reform policies are expected to bring down the corporate tax rate from 35% to 15%. There is also an expectation in the market that there might be some reduction in the personal tax rate for big earners. This proposed tax restructures process could boost companies’ net earnings, and the improvement in net earnings could help the companies invest in new projects while expanding existing production capabilities.

Moore stated that if these reforms will take place in 2017, we can expect higher earnings growth in 2018. But Moore also said that she is a little concerned about the broader global market. The uncertainty arising from the UK (EWU) is expected to impact overall investment sentiments.

In the next and final part of this series, we’ll analyze Moore’s view of momentum stocks.

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