Trump’s tax cut plan may further bull run

downside risk to equity markets,” and that its economist was predicting a 65-per-cent chance that cuts are passed early next year.

“If developments in Washington lift the odds of tax reform closer to 100 per cent, or hint at larger cuts than we currently expect, S&P 500 could continue to rise toward 2,650,” Goldman said. “On the other hand, a collapse in expectations would likely mean the reversal of the market’s recent five-percent rally.”

Canaccord said investors aren’t adjusting their expectations to account for a number of headwinds that have become tailwinds for further economic growth, including “the strong possibility of a cut in corporate tax rates in 2018.”

“Regulatory reform and the potential for corporate tax cuts have kept Consumer and Small Business Confidence near historically high levels,” added the firm.

Canaccord said it currently has “no fundamental or tactical reason” to back down from its 2018 target for the S&P 500 of 2,800, citing the potential lift from tax reforms.

“In other words, our SPX 2,800 target could prove to be overly conservative by a couple (of ) hundred points,” it said.

Goldman Sachs noted Friday that it was the 30-year anniversary of Black Monday, when the Dow Jones Industrial Average fell 508 points, or 22.6 per cent, its greatest-ever single day decline. The gloomy anniversary also coincided with 20 months since the last 10-per-cent S&P 500 correction, Goldman said, leading clients to ask “When will the rally end?”

“We do not expect an imminent drawdown and believe tax reform will determine the direction of the S&P 500’s next 100 points,” the firm said.

“Persistently cautious investor sentiment is one reason we expect limited downside from any economic or policy-related disappointment.”

Brian Belski, chief investment strategist at BMO Capital Markets, said Thursday in a note that “tax reform and Fed policy have been two of the most-discussed topics among investors lately,” with a variety of opinions on what they could mean for stocks.

“Thus, we believe it is only a matter of time before the unprecedented level of market tranquillity is disrupted as these matters unfold,” Belski wrote. “Nonetheless, we do not envision any sort of major U.S. market meltdown in the coming months and would encourage investors to use any periods of potential weakness as an opportunity to increase U.S. stock exposure even further.”