Friday, January 20, 2017

Will Pro-Business Policy Pass? 'Throw It Up Against The Wall And See If It Sticks'

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*Republicans were surprised when PE Donald Trump knocked down their tax plans.

*Those tax plans involved lowering corporate tax and taxing imports. That's not so dissimilar to PE Trump's plans.

*The lead up to the presidency appears to be a preview for the next four years. The first month or two will be our cue for the next four years.

*Getting funded policy passed will be bullish. Not getting funded policy passed will be bearish. We'll explain.

"I Don't Love It."
Republicans had been moving to pass a tax plan that would involve taxing imports and reducing corporate taxes. They had been in touch with the Trump team and were working quickly.
That is until they saw PE Trump say in an interview:
"I don't love it."
"Too complicated."
Many on Wall Street have been excited for a pro-business administration. PE Trump is a businessman himself, and Republicans are of course known to be pro-business. Republicans also have a majority in Congress.
If Republicans can band together and agree with PE Trump, we are going to see a lot of pro-business legislation get passed, which should help markets. That's why markets jumped after the elections. PE Trump's initial pro-business speech after being officially elected helped markets go up.
Keep in mind we said above "if republicans can band together and agree with PE Trump."
That is turning into an unknown.
The fast way that PE Trump knocked down tax legislation as well as healthcare legislation brings the next four years into question. Republicans work to agree and write up documentation to soon find out that PE Trump says he will not pass it.
Two things happen.
1. Either Republicans learn to be incredibly fast and flexible or
2. Toughen up and become stubborn.
Highly popular among Republicans, House speaker Paul Ryan had regular run-ins with PE Trump during the election campaign. It's very likely that their relationship will not be perfect. For legislation to pass, that connection between Speaker Ryan, Congress and PE Trump will need to work.
Reagan's Tax Took Time
Source: Macrotrends
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We Love Stocks In 2018

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*Monetary policy hasn't sparked the economy, yet.

*Fiscal policy may not spark things at least initially.

*Starting in 2018 and beyond we expect demographics to help drive markets higher.

*That timing may not be too bad for PE Trump's re-election aspirations.

Since the 1970s, GDP has been in a downward trajectory. GDP2%-3% GDP growth is probably another peak in that longer term trend. We worry that if the Fed emptied out all they could and didn't drive a pickup, fiscal policy could meet the same ends. We think the main factor is demographics which hits a low next year. Until then we think there is a downward bias to markets (NYSEARCA:SPY) this year. But we love 2018.
GDP And Markets Go Together
Source: St Louis Fed

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ETFs reported by Elazar Advisors, LLC are guided by our weekly and monthly methodologies. We have a daily overlay which changes more frequently which is reported to our premium members and could differ from the above report. Portions of this article may have been issued in advance to premium members. All investments have many risks and can lose principal in the short and long term. This article is for information purposes only. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC and their related parties harmless. Any trading strategy can lose money and any investor should understand the risks.

#in, $spy, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD ELAZAR ADVISORS, LLC AND ITS RELATED PARTIES HARMLESS