New Tax Bill and What to Expect

What should we investors expect if/when the new tax bill goes into effect.

First it is altogether reasonable for share holders to add to the end of year sell off with sales to make ready for taking advantage of the change. So we can expect both and end of year drop and a new year drop in the market.

Before the end of the first quarter we should see large but measured increases in dividend amounts. This will have the normal, buy up to, sell off reporting, x-dividend, and date of record variations. After that we should begin to see stock prices increase to bring these dividend amounts in line with normal dividend yields.

Along with those first quarter reports and dividends we should hear about how companies’ plans to use the low tax opportunities. This should further increase prices. We are likely to find governments encouraging immediate construction and growth. So jobs will begin to pickup during the second quarter to continue all year.

Given the current employment level wages will begin to accelerate throughout the year. The Fed will, ASAP, take their rate to 2%. That will be a 3/4 % rate increase in less than a year so interest rates will increase all year.

Investors will do well to watch the balance sheets of companies they invest. It will not matter in 2018 but there after, cash flow will be important because of increased dividend commitment, wage and salary increases, and increased cost of borrowed money.

Be all this as it may, the global competitive tax rates will continue to encourage companies to bring profits earned outside the country home. It will also encourage companies to come back to the US. We are likely to see foreign companies relocating to the US. We may even see a recession in some economies outside the US.

We should be able to ride this tax renaissance of our economy until we screw it up. We must not over spend at any level, over borrow, over regulate, or even overvalue stock prices. Economic cycles only exist because people over do and over correct. There will be every temptation to rationalize some unwise expenditure, behavior, investment or work place restrictions. How long the coming renaissance will last, will be completely dependent on individual and collective self-restraint.

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New Tax Bill and What to Expect