Bernstein: Tax Reform Is Bullish for the Equity Market



Tax reform

On December 2, 2017, the Senate passed Donald Trump’s tax reform bill, and on December 20, 2017, the House of Representatives passed the bill. Afterwards, the S&P 500 (SPX-INDEX) (SPY) rose to a record high.

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Richard Bernstein on tax reform

In an interview with CNBC, prominent investor Richard Bernstein stated that tax reform could be very helpful for US corporates (QQQ) and bullish for equity markets. The corporate tax rate reduction will likely benefit ownership capital, and this ownership capital is shareholders’ capital. Shareholders will benefit through the investment of improved net profits in new projects, boosting existing capabilities and dividends.

In a recent report, Goldman Sachs (GS) shared that tax reform could boost the S&P 500’s (SPX-INDEX) earnings by 5% and the healthcare sector’s earnings by 1% in 2018. However, tax reform could also lead to a 3% fall in technology earnings (XLK). For more on tax reform, read Jim Chanos on Tax Reform, the Health Care Sector, and Short Bets.


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