Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
Blog Home
Bob Carey
Chief Market Strategist
Click for Bio

Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube

  The Passage Of Tax Reform Could Provide A Boost To Industrials
Posted Under: Sectors

View from the Observation Deck  

  1. After Congress passed the Tax Cuts and Jobs Act (TCJA) on 12/20/17, President Donald Trump signed it into law on 12/22/17. 
  2. President Trump touted tax reform as a tax cut for the middle class, but the biggest boost to the U.S. economy and markets could come from the reduction in the federal corporate tax rate from 35% to 21%, in our opinion. 
  3. While a tax cut of this magnitude should be a win-win scenario for all sectors, Industrials has the second highest effective tax rate at 29.7% (includes deductions) paid by the 11 major sectors, according to S&P Global Data and Bloomberg.
  4. In addition to the anticipated tax savings, Industrials may also benefit from a TCJA provision allowing for full expensing of equipment purchases (100% bonus depreciation), according to the Tax Foundation. It is a temporary provision that will begin to be phased out after 2022. The Tax Foundation believes that "full expensing for equipment is one of the most pro-growth aspects of tax reform." 
  5. Lastly, the passage of the TCJA gave President Trump his first major legislative victory. That was critical for getting Trump's $1 trillion U.S. infrastructure initiative up for consideration in 2018, in our opinion. 
  6. The S&P 500 Industrials Index outperformed the S&P 500 Index in five of the six periods featured in the chart. Industrials topped the broader market for the 15-year, 10-year, 5-year, 3-year and year-to-date periods ended 1/19/18.
  7. The returns were as follows (S&P 500 Index vs. S&P 500 Industrials): 15-year average annualized (10.10% vs. 11.09%); 10-year average annualized (10.15% vs. 10.38%); 5-year average annualized (15.97% vs. 16.68%); 3-year average annualized (13.96% vs. 15.12%); 1-year (26.64% vs. 25.20%) and year-to-date (5.20% vs. 5.23%). 
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance. The S&P 500 Industrials Index is a capitalization-weighted index comprised of S&P 500 constituents representing the industrials sector.

Download a PDF of this post, please click here.
Posted on Tuesday, January 23, 2018 @ 9:55 AM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
Market Commentary and Analysis
Market Commentary Video
Weekly Market Commentary
Weekly Market Watch
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email

US Stocks Ended Jan. 19, 2018
US Economy and Credit Markets Ended Jan. 19, 2018
The Bull Market & Trump Rally
The U.S. Dollar Lost Ground In 2017
US Stocks Ended Jan. 12, 2018
US Economy and Credit Markets Ended Jan. 12, 2018
A Snapshot Of Fixed-Rate Bond Yields & Total Returns
Four Strategic Priorities for 2018
Corporate Earnings Estimates Reflect Strength
US Stocks Ended Jan. 5, 2018
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2020 All rights reserved.