~ Capitol Hill

Move Over Yellen! It’s Tax Cut Time!

September 29, 2017

  • Yellen remains steadfast on the interest rate path
  • Stock market takes the higher probability of December rate rise in its stride
  • The health care repeals effort fizzle out clearing the desk for Congress to focus on tax cuts
  • Small caps lead the charge, after underperforming the larger indexes till now
  • Tax cuts provide impetus to the uptrend despite elevated monetary policy risk near-term ~ Stock Market Pulse

Market Pulse


Quantitative Easing Reversal or Balance Sheet Rollback- No problem!

Rising probability of an Interest Rate Hike in December - No Problem!

"Rocket Man" Vs "Dotard" - No Problem!

Tax Cuts are now on the anvil, and that's a bigger deal for the market as all major indexes approach or record new all-time highs, including the lagging small-cap Russell 2000 index. The market has been waiting long for this moment when the legislative focus turns towards tax reform. For the next two weeks, till the third quarter earnings season begins, news on the tax reform will exert a driving influence on the market direction.

Monetary Policy


The stock market received a fairly unequivocal suggestion this week from the Federal Reserve Chair Janet Yellen that the interest rate path appears to be what has been outlined in the projections, and the final interest rate hike for the year, most likely in December, remains on the table. ~ Janet Yellen - Tax Cuts to Help Stocks

"It would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” Janet Yellen, September 26, 2017

In our earlier report Will The Federal Reserve Send The Market Higher, we had mentioned that a combination of quantitative easing rollback and an interest rate increase within a short span of time can elevate market risk, due to unanticipated risks of a rollback, and the possibility of over-tightening thus causing an economic slowdown.

The rest of the article in its entirety can be viewed on Seeking Alpha.


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