Following the backing of Sen. John McCain on the GOP tax reform bill, markets have surged to new all time highs as tax-sensitive banks lead the way, with Bloomberg reporting that odds for the tax bill’s passage may increase to “near-certainty” if the Senate can finish its version in the days ahead, citing Evercore ISI. And speaking of banks, the KBW bank index is up over 1.3% to the highest since Oct. 2007, outpacing the S&P 500’s 0.7 percent gain. This is just more of the same: since Trump’s election, banks have outperformed dramatically with the BKX up 40% vs S&P 500 +24%; top performers include SIVB (+86%), BAC (+68%); Citigroup (+52%); JPMorgan (+51%).
So at least according to bank stocks – and the market – tax reform appears to be a done deal. This is confirmed by online betting market PredictIt, where odds for a tax deal by the end of 2017 have jumped to 76%, up from 40% three days ago.
But do Wall Street analysts agree? As the following summary from Bloomberg shows, opinions range from Evercore’s 75% odds of a deal getting done by Q1 at the latest, with some such as Horizon Investments suggesting corporate tax rate may have to settle at 22% (especially if Trump “blows a gasket”), to pessimists such as Bloomberg Andrew Silverman stating that “the Senate will have tough time passing first stab at ax-overhaul, contrary to equity markets’ expectations for successful reform, as many have doubts about the bill and margin for failure is 2 votes.”
Here is a full run down of some analyst views on the state of tax reform, courtesy of Bloomberg.
EVERCORE ISI (Terry Haines)
HORIZON INVESTMENTS (Greg Valliere)
COMPASS POINT (Isaac Boltansky)
COWEN (Chris Krueger)
BLOOMBERG INTELLIGENCE (Andrew Silverman)
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