Clouds over Trump tax plan may curb appetite for U.S. stocks
By Megan Davies and David Randall
NEW YORK (Reuters) - Wall Street has tempered its expectations for sweeping U.S. tax cuts in the wake of President Donald Trump's stinging healthcare defeat, a move that could push investors to embrace cheaper global stocks after the heady U.S. rally of recent months.
The White House turned its attention to an overhaul of the tax code after Republicans were forced on Friday to pull legislation that would have begun dismantling the Obama administration's 2010 healthcare law.
Trump made tax cuts, including a lowering of the rates paid by corporations, a pillar of his 2016 presidential campaign. His Nov. 8 victory whetted the appetite of business and investors who saw passage of a tax bill as a virtual slam dunk.
But the Republican infighting that doomed the healthcare bill in the House of Representatives and the evaporation of the savings that it was seen generating have made the endeavor more problematic.
"Now it appears some of the initiatives in the tax bill will have to be scaled back or even eliminated," said Robert Willens, an independent tax analyst. "It clearly has to be less ambitious."
Others are even less optimistic.
"Getting corporate tax relief done in 2017 has gone from a decent chance to remote," said Michael Purves, chief global strategist at Weeden & Co. "That's a huge contributor to potential earnings."
Economists at investment bank Goldman Sachs see "some downside risk" to their original expectation for a tax cut of around $1.75 trillion over 10 years, though they still see a deal passing. Continued...