There is an old story that goes “beware what you wish for…” Things don’t always turn out as expected. Two years ago the President proposed and Congress approved a huge tax cut plan… the Tax Cuts and Jobs Act (TCJA). The results have been controversial.
Along those lines I watched a fascinating interview of Tom Lee, head of research at Fundstrat, on Bloomberg two years ago. His insight proved very valuable and accurate. (1)
His feeling is that a Tax cut, as it was being discussed, could be negative for investors long term. “There’s two reasons; First, when cutting tax rate you raise the after tax cost of debt. Leverage becomes a problem for a lot of businesses. Second, because you are cutting tax rates you are effectively giving cash to all businesses, even businesses where you want to reduce allocation.“
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