S&P 500 Hits Record as Trump Propose Biggest Tax Overhaul
By: Eddy Peng Sep 28, 2017
Prompted by companies that are beneficial from tax cuts, the S&P 500 Index rose as much as 0.35 percent on Wednesday, ending one point from a record as U.S. president Donald Trump launched a tax reform, on purpose of stimulating demands and spurring economic growth.
The surge of the S&P 500 Index is mainly led by banks and tech shares’ climb on the prospect lower taxes will fuel economic growth. Small caps, a group with among the highest tax rates, climbed the most since March.
President Trump and Republican leaders on Wednesday proposed the biggest tax overhaul in three decades, giving significant tax cuts to most Americans, and aiming at helping working people, creating jobs and making the tax code more simple and fair.
The tax overhaul, however, still prompts some criticism that the plan favours the rich and companies, and could also add trillions of dollars to the deficit. It likely faces an uphill battle in Congress with Trump’s own party divided and Democrats hostile, because the proposal, which would benefit people in high-tax states dominated by Democrats, can be also seen as an effective political method in gaining more supporters to Republicans.
Great efforts made by Trump and his administration to pass tax cuts in Congress will tremendously spur growth and investment, driven by higher demand and consumption because the public would get more wages from tax cuts, and also by more energetic investment activities conducted by companies. Coupled with the recent hawkish tone from Federal Reserve Chair Janet Yellen on Tuesday that boosted the probability of a December interest rate hike, the outlook for dollar would be more promising and starts to step into the bullish trend.
“Tax reform will be crucial in both making America competitive again and possibly extending this aging economic recovery, but it won’t happen in a vacuum and interest rates are not going to sit idly by if growth and inflation truly respond to any fiscal boost,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to clients Wednesday.
Technically the intraday trading is currently at 2503.8 as of 12:10 p.m. in Sydney, having a slight drop from the day before, with a strong Relative Strength Index (RSI 14) of 63.7910. Along the way that the index’s rising trend, we draw a developing ascending channel connected by session highs and lows to show the current trend of the index.
Since it is likely prompted by fundamental factors especially the tax reform in the U.S., the index will probably break out the resistance found at yesterday’s high and hit the record. If it does not, it may find support on the 20-day moving average near 2489.8.
Chart 1: SPX500 Daily
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