“Love supersedes all armies.” – Dick Gregory
The market continues to benefit from positive investor enthusiasm fueled by a combination of factors:
- Strong corporate earnings performance for the first half of the year.
- A weaker dollar has made it easier for U.S. companies to sell their products overseas.
- U.S. wages have improved enough to encourage consumer spending.
- Interest rates remain low, providing continued sources of borrowing capital, and
- Earnings reports for the September quarter are expected to be positive.
On the policy front, the White House has placed the Healthcare initiative on the backburner to fully focus on tax reform which will be less likely to accentuate party divisions and, if approved, will benefit both large and small companies. RBC Capital Markets estimates that a drop in corporate tax rates from their current effective average rate of 27% down to 20% would add a proportional 7% to per share earnings. Smaller companies, which tend to pay a higher effective tax rate, would benefit even more from the tax cut.
With all of this good news, where can things go wrong?