Locking bias

Locking bias

Stocks are once again pushing higher, as investors continue to have faith in the Trump Administration’s ability to pass the tax reform bill that is anticipated to be presented for a vote shortly.  If this does pass, stocks should continue to rally, as a lower tax burden will increase corporate profits and boost earnings and dividends.  We anticipate this to be a battle for the Administration, as many already believe that a 35% corporate tax rate is too low and that corporations already aren’t paying their fair share back into the tax system.  Given that corporate profits are again taxed on a personal level once paid out to owners, the other side feels that the double taxation is too great a burden and that lower tax rates on corporations is justified.  Either way, it will be an interesting battle to watch. 

 

The Fed’s favorite gauge of inflation, Personal Consumption Expenditure (PCE) for the month of April was released this morning.  Surprisingly, it showed a pretty good drop, moving from 2.1% down to 1.8% annually.  The Core Rate, which doesn’t include food or energy prices, also moved lower down from 1.8% down to 1.6%.  This number has been heating up in recent months, so this move lower was not anticipated. 

 

We had interesting commentary from Ex-Fed President, Ben Bernanke.  He said that he doesn’t believe the US will achieve a 3% GDP in 2017.  This pessimistic view comes as a surprise, as many feel that our economy is on track to hit this critical number. 

 

With the stock market robbing the bond market of steam, we will maintain our locking bias.