Today, the market took a trip to a Disney Amusement Park. The Dow started off low, and gradually climbed into the positive, building anticipation of another good day! Then as it neared the top, it was full of jubilation and wonderment as it admired the beauty of this new high and everything else around it….and then Dow saw Michael Flynn. Terror filled the Dow. It squeezed its eyes shut, and screamed in horror as it helplessly fell 400 points. A quick 140 point rebound momentarily calmed the Dow, but it was a cruel illusion as it suddenly jerked it into another 100 point free-fall. Wondering when this would all eventually end, the Dow started to hear the Republican Senators on the ride whispering comforting words of “tax reform” and “we have the votes”. As this happened, the ride started to return to its starting position, and slowed down. When it finally came to a stop, Mickey greeted the Dow with an “Oh Boy!”. As a foggy Dow got off the ride, it took inventory of itself and realized it had lost 40 points, but still had 24,231 points at the end of the day.
The moral of the story: don’t lie to the FBI because it might cause a “dip” in the stock market – oh, and you might end up in jail too. On a bright note, you won the day if you have lots of gold bars and drums of oil stored in your basement.
Interestingly enough, the one sector that has been under pressure as a result of the proposed tax reforms, is the tech industry. Tech has the lowest effective tax rate of all the sectors so there is not as much room to gain from a tax cut, and in addition, much of the tax reforms are focused on trying to tax overseas revenues, which make up 59% of tech companies sales. This reality and the high probability of increased interest rates is much of the reason for the recent sector rotation out of tech and into financial services.
In other news, job growth continues to look solid and incomes are on the rise.