Stocks May Not Need Tax Reform

Stocks May Not Need Tax Reform

REUTERS/Brendan McDermid

Researchers at Credit Suisse don’t think the stock market rally this year has been driven by hopes for tax reform, since in their analysis companies with high effective tax rates that would stand to gain from a significant reduction in rates have actually lagged the overall market. And while stocks may get a boost if and when tax reform passes, the effects could be short-lived, since the economy is already operating close to capacity.

Jonathan Golub, Credit Suisse’s chief U.S. equity strategist, told CNBC: "At the end of the day a lot of people are attributing the market's success to tax reform. We don't really see it … There are other things going on - favorable economic backdrop, ISMs for example, and at the same time, valuations on stocks remain reasonable and should go higher.”