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Just when it looked like the stock market was drowning in a sea of worry, President Donald Trump has thrown it a life line.
Trump on Friday said he will reveal a “massive” tax package that will deliver cuts “bigger I believe than any tax cut ever.”
The president plans to unveil the details on Wednesday, as he reiterated in a Saturday tweet:
Big TAX REFORM AND TAX REDUCTION will be announced next Wednesday.
— Donald J. Trump (@realDonaldTrump) April 22, 2017
Some of the stock market’s sluggishness since the S&P 500 SPX, +0.61% hit a record on March 1 has been blamed on the absence of meaningful policy change since Trump took office. As a result, hints that the president is committed to delivering on tax reform and deregulation have been helping to offset worries about soft economic data, most notably tepid auto and retail sales.
The S&P has gained 1.7% so far this week, boosted also by upbeat earnings reports, as well as centrist French candidate Emmanuel Macron performing well in the first round of France’s presidential election. The stock benchmark closed Tuesday just 0.3% below its March 1 all-time closing high.
U.S. stocks and 10-year Treasury yields have been rising as investor bet that tax reform will free up capital and pave the way to greater spending by individuals and businesses, said Kathy Lien, managing director of FX strategy at BK Asset Management, in a note late Tuesday.
“Trump is a master salesman and tomorrow will be about how well he sells his plans,” she wrote.
“Of course, the problem has always been in the lack of details on how tax cuts will be funded because they won’t pay for themselves!”
Investors on Twitter are highlighting how tax reform is a key focus…
Tax cuts are the new buybacks, now that buybacks are no longer the new QE. $SPX
— Dow (@mark_dow) April 25, 2017
…and how bulls might end up disappointed:
Market is setting up for a sell the news event tomorrow if the general tax reform plan Trump promotes falls on skepticism & discord. $SPX
— W C Hsueh (@WCHsueh) April 25, 2017