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Politics : Formerly About Advanced Micro Devices
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To: Rarebird who wrote (1037471)11/9/2017 1:24:07 PM
From: RetiredNow  Read Replies (1) of 1573946
 
To quote myself:
If the GOP can pass the tax reform, then this thing could continue awhile longer, but will tax reform overcome the effects of the Fed and CBs the world over withdrawing massive liquidity from the markets between now and next year? I doubt it. CB intervention has explained almost all of the variation in stock and bond market returns since the Great Recession and the advent of QE and ZIRP. That's the only story that matters.
Looks like the first shoe has dropped. The news is telling us that the GOP tax reform bill has corporate tax reductions being delayed until 2019, which is why the stock market is reacting badly today. I still think tax reform of any kind doesn't get done this year, but already it looks much weakened even if it does. That's the first shoe.

The second shoe is the Quantitative Tightening by the Fed. The Fed Balance Sheet dropped from $4.460 Trillion to $4.456 Trillion, or $4 Billion. Not the $10 Billion per month in Q4 that Yellen promised, but it is a bit of a decline. However, since they are off by $6 Billion, I still put it in the "Yellen and the Fed lied about starting QT" category. Since that is explaining most of the variation in stock returns, I think you still have a chance that the stock market will be ok. However, if they accelerate the reduction in November and you also get a delay in tax reform, then look out below.

One shoe down and the other shoe is uncertain.
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