Barclays: “Equities Rushed To Price In The Reagan 1986 Tax Cuts Before Crashing In 1987”

Jon Alternative Media, Blogosphere, Economy, Fiscal Policies, Market Commentary

With concerns rising that the market has gotten well ahead of itself over the practical reality of Trump tax cuts – most recently voiced by Goldman which over the weekend said that “we are approaching the point of maximum optimism and S&P 500 will give back recent gains as investors embrace the reality that tax reform is likely to provide a smaller, later tailwind to corporate earnings than originally expected” – Barclays decided to look at one of recent history’s most notable tax regime changes: the Reagan tax cuts.
What it found was interesting.
First, the market wastes no time in factoring in any to corporate taxes and according to Barclays calculations, corporate tax cuts get 85-90% priced in very short order. As an example, Barclays points out that the Reagan 1986 tax cuts showed that equities price in the benefits quickly. Perhaps too quickly.

This post was published at Zero Hedge on Feb 19, 2017.