Tuesday, September 12, 2017

Higher markets as Trump will promote a new tax plan to promote growth

Dow rose 42, advancers over decliners better than 3-2 & NAZ added 6,  The MLP index was fractionally higher in the 281s & the REIT index fell 1+ to the 358s.  Junk bond funds climbed higher & Treasuries retreated again.  Oil inched up pennies in the 48s (more below) & gold lost only 3, still well above 1300.

Dow Jones Industrials

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Pres Trump plans an aggressive travel schedule, taking him to as many as 13 states over the next 7 weeks, to sell the idea of a tax overhaul as the administration tries to avoid repeating the communications failures of its attempt to repeal Obamacare.  With a make-or-break legislative battle looming on taxes, the White House is moving to clean up a disorganized communications operation.  The strategy was revealed by top advisers to about 40 allies during a closed-door meeting last week.  It calls for the pres to visit states he won where a Dem senator is up for re-election next year, including Florida, Indiana, Michigan, Montana, Ohio & Pennsylvania.  In some instances, cabinet members will be deployed behind Trump in a “second wave” after his speeches & town hall meetings to amplify his message.  White House officials held the private meeting on Sep 8 to share details on its political strategy for tax legislation with allies who can deliver the message on cable news & in local media interviews.  Separately, they're prepping economists such as Arthur Laffer, Lawrence Kudlow & Stephen Moore, who served as informal advisers to Trump's campaign.  The administration plans to mount the full-bore sales campaign even though congressional Reps haven't yet determined key elements of the plan, including tax brackets for individuals, a corp tax rate, what popular tax advantages will be eliminated or even whether the changes will be permanent or temporary.  White House officials have concluded that, even without a specific tax plan, Trump can build support early by making a broad case for lower rates, a simpler tax code & more incentives for multinational corps based in the US to bring home profits stashed overseas.

Trump Plans Aggressive Road Show to Sell Tax Overhaul

US stocks resumed gains after reaching a record to start the week & the $ strengthened while Treasuries fell for a 2nd day as the Trump administration plotted strategy for pushing a tax overhaul.  The S&P 500 Index was lifted by materials stocks as technology shares.  The Stoxx Europe 600 Index climbed for a 5th day. The £ jumped as US inflation accelerated more than forecast & oil fluctuated as producers were said to discuss extending output cuts.  Today's rally showed demand for riskier assets continues after North Korea refrained from provocations following the UN Security Council's move to impose sanctions & as the threat from Hurricane Irma receded.  Pres Trump was said to be planning an aggressive travel schedule to sell the idea of a tax overhaul that he promises will bolster growth.  “There is no question that the stock market has an expectation that we are going to get tax reform done,” Treasury Sec Steve Mnuchin said.  “The stock market has expectations that we are going to create significant growth. Which is what this president and this administration is focused on.”
Stocks Rally Globally as Dollar Extends Advance: Markets Wrap

OPEC & its allies are discussing extending by more than 3 months the oil production cuts that expire in Mar 2018, potentially prolonging them well into H2-2018 in an effort to boost prices.  An extension of that duration would be needed under the worst-case scenario for the oil market that OPEC ministers are now contemplating & one option under discussion is a 6-month extension.  OPEC & other producers including Russia, Mexico & Kazakhstan pledged to reduce output by about 1.8M barrels a day to eliminate a global surplus that was depressing prices.  The deal, reached in late 2016, initially called for a 6-month period, which later was extended with another 9 months until Mar 2018.  Despite the cuts, oil prices have struggled to break above $50 a barrel after being weighed down by the resurgence of US shale production.  OPEC & its allies are now discussing a further rollover ahead of a ministerial meeting scheduled for late Nov in Vienna, with a 3-month extension seen as the minimum.  The duration will depend on multiple variables, including the level of compliance with agreed cuts by OPEC & its allies, the pace of the oil-output recovery in Libya & Nigeria, US shale supply & the strength of global demand.  OPEC's own estimates show that even with demand for its oil likely to increase next year, the group won't be able to reverse curbs on output if it wants to balance the market.  The organization boosted its forecast for the amount of crude it needs to supply by 400K barrels a day to 32.8M barrels in 2018, which remains in line with production last month.  The group's total output dropped 79K barrels a day to 32.8M a day in Aug amid a retreat in Libyan production.  The cartel, which pumps 4 of every 10 oil barrels the world consumes, said that demand for its crude in the Q1 & Q2 of 2018 will be lower than its current production, suggesting oil inventories will increase once again in H1-2018.  OPEC pegged demand for its crude at 31.8M barrels a day in Q1 & at 32.4M in Q2.  That compares with current output of nearly 32.8M barrels.

OPEC Discusses Extending Oil Cuts by More Than Three Months
The bulls are feeling good today.  Apple, a Dow stock, will introduce its new iPhone & tongues are hanging out in anticipation.  Its reception will drive the Dow & NAZ later today.  Thougts about tax reform stimulating the economy are always a plus.  But that reality is still a long way away, especially with a deeply dividend Congress.  The $&P 500 is in new record territory, making the bulls very happy.  Meanwhile gold (contrary investments) remains at high levels.

Dow Jones Industrials

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