The disconnect between news headlines and the markets is as wide as it’s ever been. While our newsfeeds are filled with articles of scandal, natural disasters, and Buzzfeed lists; the S&P 500 has closed at a record high 45 times in 2017. What is the driving force behind this rise in stock prices? Our chairman and chief strategist, Harlan Cadinha, recently explained his optimism in Barron’s Big Money Poll:
[Harlan Cadinha] bases his bullishness on potential tax reform that he says will reinvigorate capital investment in the economy. “With the right kind of tax cut, this could turn into a screaming bull market”. Cadinha has been slowly increasing his investment in equities to closer to 75% of assets, and pulling the duration of his bond portfolio as short as possible.
While much of the “splash” of potential tax reform is likely priced in, we are taking a deeper look, selecting companies that will benefit most from an expected cut in the corporate tax rate, not just in the immediate future but beyond.