Stock Markets are Focused on Deficit Funding
Effects of Tax Change Bill
Since mid-December 2017, the stock market has been focused on possible effects of the Tax Change Bill. Those issues fall into two categories, 1) one for sure, a rising federal deficit, and 2) possible increased economic growth. The deficits are coming first, and the relatively large T-Bill and T-Bond sales this week are testament to that fact.
Market guru’s are understandably pressing the short Bond trade in the anticipation that these two factors will push up interest rates, but they say, no it will not affect the stock market until the ten year bond yield goes above 3.5 percent. The economic growth component is what we have difficulty believing. As such the current pressure on bond prices may be well priced at this point.
What if Growth Doesn’t Happen
With stocks already pricing in a sure growth spurt, that is the Risk Factor at the moment.
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