Republican tax plan prompts investment banks to raise forecasts

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Strategists for top Wall Street investment banks have raised their 2018 forecasts for U.S. equity markets prior to the beginning of the new year.

Credit Suisse and Canaccord Genuity joined a growing list of banks that have cited the 21-percent corporate tax rate in the recently passed Republican tax reform legislation when adjusting their S&P outlooks upward.

The reduced corporate tax rate is expected to boost earnings for many of America’s largest companies more than they predicted when devising their initial forecasts for 2018.

The optimism comes as the S&P reaches new records daily. The index soared to an all-time high on Monday and fell just short of beating that record on Thursday.

“The assumptions that we initially made, which were a 23 percent tax rate, 30 percent interest deductibility and then 50 percent on cap expensing … those were just not aggressive enough,” said Wells Fargo strategist Scott Wren.

Credit Suisse strategist Jonathan Golub also revised his models Thursday, writing to clients that “corporate results have surprised, GDP expectations have improved, and tax rates have fallen.”

“In the first half of the year, I think, clearly, the economy’s going to be better and I think the question investors are now asking is how much of an extra kicker do we get on the economy,” Golub told CNBC.

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