Law

Once the Senate approved a Budget Resolution, the House passed its tax reform measure, while the Senate is working toward a vote on a plan approved by its Committee along party-lines, in a 14-12 vote.  The final Senate vote on its bill is expected November 27, after which differences will likely be debated in committees with a final reform measure proposed.  While enactment of tax reform legislation is by no means certain, the odds for tax reform appear to be more favorable than they have been at any other time since the Tax Reform Act of 1986. Goldman Sachs predicts a 65% chance.

Econ

Normally, when the Country is at full employment fears of inflation are heightened as a result of wage increases. Wage pressures, however, are muted and are not themselves justifying the Fed increasing interest rates. As has been written before, the Fed is likely justifying its intentions and actions as a method of reigning in elevated valuations in the financial markets.  Nevertheless, the CPI only increased .1% in October with core CPI at .2%, down from the prior two months… mainly from a drop in gasoline prices. For 12 months, CPI is 2%.  A Fed rate increase is expected in December with 3 projected in 2018.  Fiscal stimulus from tax reform may be a deciding factor for the Fed. For our latest market valuation metrics, see Market Valuation Metrics