Wall Street strategists: Trump's tax cuts will boost stocks

The tax cuts proposed by incoming U.S. President Donald Trump are set to boost stock prices for years to come, Business Insider reports.

Among the measures Trump is considering is cutting the corporate tax rate from 21% to 15%. The move likely won't have as big an impact as the 2017 tax cuts, from 35% to 21%, but his current tax plan could impact about 145 S&P 500 companies, accounting for 18% of the market capitalization and 23% of the profits of all companies in the index, according to an analysis by JPMorgan Asset Management.

"Of course, domestic revenue is an incomplete picture because it doesn't reflect where goods are produced, but it can give an idea of the magnitude," Meera Pandit, the firm's global strategist, wrote in a note.

The promise of lower taxes has fueled Wall Street bulls' optimism, with strategists competing to predict higher stock prices and corporate profits in recent weeks. Goldman Sachs believes Trump's tax cuts could boost corporate earnings for S&P 500 companies by more than 20% over the next two years. Goldman estimates full-year 2024 earnings per share for the S&P 500 will be $241, rising 11% in 2025 and 7% the following year, to $288 per share.

"We estimate that each percentage point cut in the tax rate would increase S&P 500 earnings per share by just under 1%, all else being equal," strategists wrote recently. The Goldman team also believes that Trump's proposed deregulation of the financial sector could also boost earnings.

Philip Orlando, senior vice president and chief strategist at Federated Hermes, also believes that Trump's tax cuts and other pro-market policies of the incoming U.S. president will be beneficial for stocks. In his opinion, the S&P 500 is on track to end the year at 6,200 points, and his estimate for 2026 is 7,500 points, equivalent to a 27% increase from current levels.

The strategist emphasized that it will take several years for the effect of Trump's tax cuts to be fully felt in the market and economy. "The rally that markets enjoyed from, say, early August until a week after the election seems to be justified by expectations of stronger economic growth," wrote Philip Orlando.

After the presidential election in the United States, shares of companies with high valuations had the largest weekly capital flow ever recorded, and financial stocks had the largest flow in the last two years, according to data from Bank of America, writes Business Insider.

Since the beginning of the year, the S&P index has increased by about 24%, according to data from Investing.com.