No Three Percent Slump: Stock Market Record Created

Published on: 28 Nov, 2017

Wall Street exhibits no volatility which the Trump era had brought. The Standard & Poor 500 has not dipped three percent from previous peaks since the slump. The latter ended on November 4, 2016- only four days before the Presidential election. An all-time low was reached by VIX Volatility index. A robust economic growth in the United States has pushed Wall Street to new highs. The upside has been fueled by overseas economic rise as well. There is also the case of optimism after President Donald Trump announced his plan to cut corporate taxes. The latter will be pushed back to the center of the table during the last week of November in Capitol Hill.

Remarkable feat

This marks a remarkable achievement by the S&P 500. The stock market has gone up substantially from the time the three percent decline streak has begun. To be more precise, it went north by a staggering 25 percent.

This long stretch of 388 days is the lengthiest the Standard & Poor 500 has ever achieved sans a dip of three percent or more. The previous record was 18 days shorter. It occurred in 1995. The event is notable as investors do not like uncertainty. President Trump's unpredictable policies bring only that.

Break up

All these events do not mean the Wall Street is going for a longer period of tranquility. One possible cause could be the failure to implement a slash in taxes. Goldman Sachs has warned that there could be a five percent drop in the S&P 500 if the tax cuts are not realized. This is all set to reach a pivot point when the Senate tax bill comes into action. The legislation by this Senate could save a large number of companies massive amounts of money through a permanent slash of corporate tax rate within 2019 from the present 35 percent to the anticipated 20 percent. A sword hangs over whether the tax cuts will result in GOP Senators like Jeff Flake and Bob Corker to oppose this plan. Both of them and a few others are not oriented towards deficits present in the economy. Even if the legislation does pass the Senate, it must be reconciled with the bill that the House passed during early November. This process could easily turn out to be easier said than done. A number of analysts, however, continue to anticipate that the tax cuts will be achieved within the start of the second phase of 2017.

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Danny Abramov

Email: danny@financialinsiders.com

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