We have mentioned a few times on this website and in our contribution to social media that tax reform is "the gift that keeps on giving." Every time it looks like share prices are about to roll over, the GOP's attempt at tax reform inches forward giving people hope that legislation will actually happen. We think tax reform is critical from a valuation perspective. With prices so high, it is hard to see how share prices can move higher without tax reform. Has the GOP painted themselves into a box? Multpl.com reports that the Price to Earnings ratio of the S&P 500 based on trailing earnings is now a lofty 25.5. A reduction in the corporate tax rate will bring this number down to the high teens, which would make equities reasonably priced asset once again.
