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Half of Investors Believe Tax Cuts Will Increase Stock Prices

This week’s Sentiment Survey special question asked AAII members how the recently passed tax legislation affects their expectations for stock market returns. More than half of all respondents (54%) believe the tax cuts will lead to higher stock prices. Many of these respondents anticipate earnings growth, economic growth or more stock buybacks and dividend hikes as a result. Several used the word “positive” in their responses. Approximately 19% of respondents think the new legislation will have little or no impact on stock prices. Many of these respondents perceive the tax cuts as already being priced in. Nearly 7% of respondents anticipate a mixed impact either with a market decline following a short-term increase or for the cuts to only impact certain sectors or industries.

Here is a sampling of the responses:

  • “I expect it to have an overall positive impact on the stock market, at least in the short term.”
  • “Positive impact on corporate profits, which should improve the economy.”
  • “Not much; I believe the increase was already priced in.”
  • “Short term, positive; medium to long term, negative.”
  • “Corporations will have more money to buy back shares, increase dividends or pay special dividends.”

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