The new year is well underway, and the bulls have clearly asserted themselves.
What, me worry? That seems to be the mantra for investors as stocks are off to a roaring start in 2018.
The themes that dominated 2017 are carrying over into the new year, including moderate U.S. and global economic growth, still-low interest rates, low inflation, and corporate profit growth.
But as we wade through January, we can add one more variable—the impact from the dramatic cut in the corporate tax rate is quickly filtering into the outlook for 2018 profits, fueling bullish sentiment.
The reaction in the market has been swift, as investors price in a sharp upward revision to 2018 earnings estimates, according to Thomson Reuters.
I believe Warren Buffett summed it up well last week when he offered his thoughts in a CNBC interview.
“You had this major change in the silent stockholder in American business, who has been content with 35%…and now instead of getting a 35% interest in the earnings (he noted foreign earnings are more complicated) they get 21% and that makes the remaining stock more valuable.”
Well said, Warren, well said.