by Mitch Kokai
Senior Political Analyst, John Locke Foundation
What’s a word worth? If the word is “phenomenal” and it’s uttered by Donald Trump, apparently $175 billion.
That’s how much the value of U.S. stocks increased on Thursday, according to Wilshire Associates’ calculations, after the president used that word to describe the tax plan that, he said, his administration would bring forth “ahead of schedule.” The ascent continued on Friday, adding another $100 billion to shareholders’ paper wealth and a total of $225 billion for the week, as the Standard & Poor’s 500 index, the Dow Jones Industrial Average, and the Nasdaq Composite all ended at records.
For the financial markets, the week’s swirl of bad news for the Trump administration, from the rejection of the reinstatement of its travel ban from seven mainly Muslim nations to Kellyanne Conway’s ethics gaffe in touting Ivanka Trump’s “stuff” after Nordstrom (ticker: JWN) decided to discontinue carrying the latter’s fashion items, hardly mattered.
The devil is, of course, in the details, and they involve some hellish trade-offs. “Will [the tax proposal] be the Ryan plan that includes a border adjustment tax, or will that be left out and we’ll get clean tax cuts at the expense of a much higher deficit?” wonders Peter Boockvar, chief market analyst at the Lindsey Group.
“That distinction is very important because if it’s the former, it won’t be so ‘phenomenal’ for those companies that import a large portion of the cost of goods sold if the dollar doesn’t rally by the same extent as the tax,” he continues. That would hit retailers especially hard, but the strength of those stocks suggest there won’t be a border adjustment tax, or BAT. However, Boockvar believes that Trump backs the plan from House Speaker Paul Ryan, with some tweaks.
Whatever the details, the president’s tax proposals face “a very long slog” on Capitol Hill, observes Greg Valliere, chief strategist at Horizon Investments. The House may move quickly, despite possible quibbles over the price tag, but “the problem, as usual, will be in the glacial Senate.”