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How Tax Reform Will Affect US Markets

Summary

The massive cuts stemming from the tax bill was almost certainly the prime driver behind the massive stock market rally that followed its passage.

It’s hard to argue against the fact that the recent reform act helped buoy the small fish of the economy, which in turn helped buoy gains in the stock market.

A veritable buyback bonanza could soon be unleashed, the impact of which will reverberate throughout the market, much to the benefit of American investors.

Recent Republican-led tax reform efforts are all but forgotten in the mainstream media, which has quickly moved on to cover more salient issues that have occurred since the passage of the Tax Cuts and Jobs Act. Nonetheless, the positive financial fallout from this tax reform effort is still being felt throughout the world, and market analysts are beginning to ask themselves just how the much the recent reform efforts will continue to shape the market in the foreseeable future.

So, what was the overall impact of the Tax Cuts and Jobs Act, and what can market onlookers expect in the near future? A review of the recent reform effort shows just how seriously it positively benefited businesses across the US, and gives investors plenty of reasons to hope for a bright future.

Businesses are booming following tax reform

While much of the initial media coverage surrounding the passage of the Tax Cuts and Jobs Act was negative, and polling showed that a majority of the public initially disapproved of the bill, with the passage of time has come a turning of opinion; today, the tax reform effort is viewed positively by a majority of Americans, which shouldn’t come as a surprise given how much the market benefited from it. Across the nation, businesses, taking a queue from Vanguard tax resolutions, granted hefty bonuses to employees, vowed to reinvest many of the funds they’d be saving from the reform, and overall felt inspired in the US economy, which has been enjoying continuous growth for years now.

The massive cuts stemming from the tax bill was almost certainly the prime driver behind the massive stock market rally that followed its passage, and while US stocks are currently sitting near record levels, it stands to reason they’ll enjoy further growth in the future as the effects of tax reform trickle down to the rest of the economy. It goes without saying that the health of the economy needs to be measured by more than the performance of the stock market; it’s the wellbeing of American consumers, the investment being carried out by businesses, and the confidence shoppers feel when visiting their favorite stores that truly drive the economy upwards.

Given that the Tax Cuts and Jobs Act spurred a massive avalanche of wage boosts and bonuses for employees at all income levels, it’s hard to argue against the fact that the recent reform act helped buoy the small fish of the economy, which in turn helped buoy gains in the stock market. The real benefits to the market are yet to come, however; the lower corporate tax rate of 21% implemented by the reform efforts will greatly incentivize businesses to churn more money out in investments, which will continue to drive stocks upwards for years.

With companies facing a better regulatory environment than they’ve seen in years, or perhaps even decades, it stands to reason that many of the hordes of cash currently stowed in offshores accounts will soon be pouring back into the US economy, driving stock prices even higher. A veritable buyback bonanza could soon be unleashed, the impact of which will reverberate throughout the market, much to the benefit of American investors.

Market experts are excited for the future

It almost goes without saying that today’s investors are all but frothing at the mouth thanks to the potential gains stemming from tax reform; JPMorgan’s Marko Kolanovic has already predicted that the recent reform efforts will provide equities with a huge boost throughout 2018, for instance. The bull market can be expected to continue raging for some time, as the positive catalyst for growth unleashed by the Tax Cuts and Jobs Act are likely only just getting started, and will take a few more years to fully kick in.

With the market increasingly turning its eye towards emerging tech IPOs, it stands to reason that the massive benefits from the tax reform efforts that Silicon Valley will soon be enjoying should unleash a series of highly valued IPOs within the forthcoming years, too. It takes more than a booming IPO market for stocks everywhere to see a serious uptick in their valuation, but a better environment for America’s tech companies in particular is without a shadow of a doubt one of the biggest boons from the recent reform.

While investors are increasingly worrying that nations like China will establish their own thriving IPO markets that detract from the prosperity of those within the US, they’ll likely be reassured by the Tax Cuts and Jobs Act that American markets have everywhere intention of staying at the top of the leaderboards. Given that markets are likely to be buoyed for years by the rising wages, hefty bonuses, and more optimized regulatory environment ushered in by recent tax reform efforts, investors can remain confident that stocks will continue to thrive in the immediate future.