Jittery. That’s how I’d characterize action on U.S. stock markets today. As of just before 4 p.m., the Standard & Poor’s 500 stock index was off 0.32%. The NASDAQ Composite was lower by 0.56%. And the small cap Russell 2000 was down 0.46%.
These aren’t huge declines but they do stand out in contrast to the steady gains the market has piled on in most days recently.
The most obvious explanation is worry over the fate of the tax cuts dangled in front of the stock market by the Republican majority in Congress and by President Donald Trump. In particular the promised reduction in the corporate tax rate to 20%, which had seemed an almost certain part of this package, now looks subject to a possible delay. Talk this week has been about the possibility of delaying this reduction in corporate rates for a year. Today Mick Mulvaney, the White House Budget Director, said that the Trump administration would not oppose delaying the corporate rate cuts until January 1, 2019. A delay in the start of the lower corporate rate would help fit the tax bill under the $1.5 trillion target for the projected 10-year increase to the deficit that would let the bill be considered under Senate rules requiring only 51 votes for approval.
I think there’s also a gnawing and increasing concern that the Republican majority might not be able to pass anything at all, despite that majority and control of the White House. Every day seems to bring sniping by one group, inside Congress or outside, about the current bill. And there parts of the bill that are objectionable enough to suburban Republicans in the House, to fiscal conservatives in the Senate, and to social conservatives in the House that the whole edifice could come tumbling down. That’s still an outside chance but the market, as evidenced by today’s jitters, is starting to consider the possibility.
I don’t think disappointment if the bill doesn’t pass would be enough to send this market into a correction–but it could certainly stall the recent rally.
