‘Tax cuts’ are like cat-nip to Wall Street traders. The Dow Jones futures market jumped higher as Trump promised a fresh round of tax breaks for the middle class.
The Dow Jones Industrial Average (DJIA) popped more than 90 points higher on Wednesday, opening the US stock market with a bang. It comes as President Trump promised a new round of monster tax cuts for the middle class.
In an interview with Fox News this morning, Trump teased a “very big” tax break within months.
We are going to be doing a middle class tax cut, a very big one. We’ll be doing that. We’ll be announcing that over the next 90 days.
Tax cuts have been a recurring theme of the Trump presidency, and a powerful stimulus for the financial markets.
The Dow Jones rebounded in fine form after a lacklustre Monday session, which was plagued by fears of a coronavirus pandemic.
The S&P 500 and Nasdaq Composite were up 0.4% and 0.67% respectively. Bitcoin traded at $8,659.
Donald Trump and Larry Kudlow, Director of the United States National Economic Council, teased the prospect of ‘tax cuts 2.0’ last week. But the president confirmed the middle-class tax break during his trip to the Davos economic forum.
Trump also talked trade, hinting that phase two of the China deal was on the way.
The China deal is amazing, we’ll be starting phase two very soon. The tariffs were left on Chinese goods because its good to negotiate for phase two.
The president then turned his attention to Europe, threatening a fresh round of tariffs on eurozone automobiles.
The European Union is tougher to deal with than anybody. They’ve taken advantage of our country for many years. Ultimately it will be very easy because if we can’t make a deal, we’ll have to put 25 percent tariffs on their cars.
The Dow Jones has gained almost 60% since Trump was elected in November 2016. Much of that can be attributed to his commitment to lower taxes. Bloomberg noted the obvious effect of tax cuts on the US stock market.
The tax cut are a large and potent stimulus. There is no rational way to reach any other conclusion.
Haverford Trust CIO Hank Smith agreed, calling Trump’s original corporate tax breaks a long-term driver of growth.
When you’ve had tax reform like this, it is not a sugar high. It has a multiyear effect.
President Trump was on something of a media blitz on Wednesday morning. He also sat down with CNBC and claimed the US stock market would be much higher were it not for the Federal Reserve raising interest rates.
Now, with all of that, had we not done the big raise on interest, I think we would have been close to 4% [GDP growth]. And I could see 5,000 to 10,000 points more on the Dow. But that was a killer when they raised the rate. It was just a big mistake.
The president knows that a strong stock market is key to his re-election. Expect him to keep talking up the market going into the 2020 election.
This article was updated at 9.38 am ET to reflect current DJIA movements.