Goldman Sachs analysts have warned that Wall Street is getting overly confident in Trump’s fast-tracked agenda for tackling key issues such as tax reform.
Goldman analysts claim there is a growing level of uncertainty as the Republican-controlled Congress pursues an aggressive number of issues, including tax reform, with the House only being in session for a short period before the August recess commences.
CNBC reports the CBOE Volatility Index (VIX) posted its lowest closing level on Monday since December 1993, as investors remain unshakably confident that the White House and Congress will be able to forge ahead on tax reform within the allotted timeframe.
This represents a unique dichotomy: investors are increasingly hopeful Washington will accomplish its tax reform plan to lower corporate taxes while Goldman analysts claim the stats give a “cause for pause.”
“The juxtaposition of rising policy uncertainty vis-a-vis declining fear in risk assets presumes a procyclical success story in D.C.,” Robert Boroujerdi, head of global securities research at Goldman Sachs, told CNBC Thursday.
“With much of the optimism priced into the market today hinging on a more complete Washington agenda we note progress may be slow with the House in session for just 39 working days before the August recess,” Boroujerdi added.
Since Trump was elected last November, the S&P 500 index has skyrocketed more than 10 percent, reaching new record highs.
The report states that Wall Street only has a vague idea about what tax reform under the Trump presidency would look like and how implementation and payment for the reform would work. These questions hang in the balance as more details on the reform agenda are waiting to be confirmed by the White House.
“Further elements of the upcoming tax plan raise questions specifically as it relates to the deduction of state and local taxes where the top 10 states most impacted yields not a single Republican senator but 46 members of the House. We note that is one more than the GOP’s current majority,” Boroujerdi said.
More from Goldman Sachs on the cost/impacts of Trump biz tax cuts pic.twitter.com/NPuAzvDZHq
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