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Market shouldn't get too excited about tax reform — yet

  • CNBC
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Market shouldn't get too excited about tax reform — yet
Stocks took a leap of faith on the prospects of a congressional tax plan, but hurdles remain and a proposal is not likely to be seen before October.

Following a firestorm over President Donald Trump's response to the violent protests in Charlottesville, Virginia, the topic of tax reform percolated to the surface over the weekend and by Tuesday was a big topic of discussion in the markets.

With the president weakened, a number of Wall Street analysts issued reports saying that changes in tax policy would be something congressional Republicans would want to rally behind ahead of the 2018 midterm election.

Stocks surged Tuesday in their best day since April, after a Politico article said the president's top aides and Republican congressional leaders have made significant progress toward tax reform and have "broad consensus" on ways to cut corporate and individual tax rates. Traders said there was also a rumor that tax changes would allow for "repatriation" of corporate profits from overseas and that would fund a plan to rebuild infrastructure.

"Today's action suggests there is some degree of optimism that something's going to get done. It's still going to be difficult," said Jack Ablin, CIO of BMO Private Bank. "Their willingness to get something done has improved. The likelihood is still very low for this year."

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