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Prospects for Tax Reform Largely Not Affecting Investor Sentiment

This week’s Sentiment Survey special question asked AAII members to describe how their sentiment toward the stock market is being influenced by the prospects for tax reform. The majority of respondents (57%) said their sentiment is not being influenced. Many in this group either expressed skepticism about the likelihood of tax reform passing or are waiting to see what legislation Congress actually passes. Approximately one-third (33%) of respondents said the prospects for tax reform are causing them to be more optimistic about the short-term direction of stock prices. Some of these respondents think the proposed tax cuts will help to boost economic and/or earnings growth, though others in this group said their optimism depends on whether or not the proposal is actually signed into law. About 11% of respondents have a negative viewpoint, with several either criticizing the proposed tax cuts or expressing concerns about the impact the tax cuts will have on the national debt.

Here is a sampling of the responses:

  • “I am not optimistic about Congress passing any meaningful reform at this time, consequently I am not giving this much consideration.”
  • “I don’t think tax reform will get through without changes and that will dampen growth prospects for the market.”
  • “I think that the lower company tax rates will increase earnings and stock prices.”
  • “Our economy needs tax reform badly; I am more positive about the market if it passes.”
  • “The market is acting positively toward the prospects for tax reform, which may not happen. This could be a problem.”

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