We believe prospects for tax reform are improving. There is much work to be done and we need additional clarity, but given that President Trump and Congressional Republicans are desperate for any sort of legislative win, we expect they will be able to come together on a modest tax reform proposal. Cuts in the corporate tax rate are likely, and we may see some sort of reform of individual tax rates as well.
Weekly Top Themes
Following a strong start to the year, global equity markets have stalled in recent months. At the same time, government bond markets have lost their upward price momentum, the U.S. dollar has declined and commodities have been mixed with food prices falling, industrial commodity prices rising and oil prices churning.
It appears as if financial markets are in a short-term pause as investors consider whether the global economy can continue to improve, question the direction of global monetary policy and anxiously watch the U.S. and global political environment. Several event risks loom on the horizon over the coming months as well, including the German elections, NAFTA negotiations, a possible showdown over the U.S. debt ceiling and key U.S. Federal Reserve meetings.
Overall, we believe the global economic outlook remains relatively upbeat and think growth is both stronger and better synchronized than in the first half of this decade. Rising uncertainty levels may cause higher volatility in financial markets, but equities and other risk assets are more likely than not to ultimately break out to the positive side of their trading range.
Bob Doll is chief equity strategist at Nuveen Asset Management.
1 Source: Morningstar Direct, as of 8/25/17
2 Source: Markit Economics