Putting 2017’ s stock returns in perspective

Since the beginning of 2017, the S& P 500 has climbed 19%. How does this compare to past years? Pretty well. The average annual performance of the S& P 500 since 1928 is 11.5%. The median comes in a little higher, at 13.9%. More recently, this year is fourth on the list of best performances since the beginning of the century.

Multiple catalysts have fueled stocks over the past 12 months. But far and away the most important one has been hope that Congress will lower the corporate income tax rate.

President Trump vowed on the campaign trail last year to cut the corporate tax rate from 35% down to 15%. As the actual legislation made its way through Congress, however, the rate ended up at 21%.

After Republican holdouts signaled their support for the bill, the legislation was signed by the president on Friday.

Why do lower taxes lead to higher stock prices? It’s simple. If corporate taxes are dropped, corporations earn moremoney. And when corporations earn more money, they create more shareholder value, making investors willing to pay a higher price for their stocks.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.