Today has been the day Democrats have been waiting for since the election. But judging by former FBI director James Comey’s released transcripts of his sworn testimony Wednesday, there does not appear to be any crime. Perhaps just a few mindless comments by a new incoming president.
Wall Street may start to put this drama of “anonymous” sources, “he said—she said” accusations, and talk of “Russian collusion” behind us. It would seem the country, as a whole, wants to move on to “tax cuts”, “jobs, jobs, jobs” and, did I say, “Jobs”? But at the same time, this investigation will most likely go on for years if politicians have their way.
Taxes and jobs
I know it’s early in June, but time is running out to achieve a new simplified tax plan and a cut in corporate taxes this year. The President’s plan to cut corporate taxes for all businesses to 15% has been one of the key factors in this rally. A cut in taxes has always meant more discretionary money in workers’ pockets. In an economy that is 80% powered by consumer spending, such a cut would rejuvenate this economy and put us on the road to a 3% GDP.
If we look at the tax cuts put in place during the Reagan administration of the 1980’s, we would find that the country went on a “hiring splurge.” During the eight years of Reagan’s presidency, there was a net gain of 16.1 million new jobs—thanks, in large part, to tax cuts. Compare that to President Obama’s eight years of higher taxes, and we see a net gain of only 5 million jobs created. To be fair, Obama inherited the worst economy since the Great Depression.
Yet, at some point, we will get higher inflation and the debt will grow. But many economists feel the rewards of millions of new workers outweigh the risk of higher debt down the road. Kicking the can down the road seems to never end, no matter which party is in control.
Across the pond today, 47 million UK voters are expected to turn out today to choose a new government. As of early this morning, the Conservative party’s Prime Minister, Teresa May, held a small lead over Labour’s Jeremy Corbyn. At the end of the day, no matter who wins or loses there will be little impact on the US markets.
Here in the US today, we received some positive data out of the Government. US Jobless Claims benefits fell 10,000 to 245,000. Overall 1.92 million people are collecting unemployment checks, down 10% from a year ago. US crude oil futures fell to $45.20, their lowest level since early May. Traders are watching closely for any break below $45.00.
Overall, expect a quiet trading day. Bonds and equities were trading flat early this morning as traders listen to the testimony of former FBI Director Comey. Wall Street would like to get back to business and move on with infrastructure projects, regulations and tax reform … let’s hope!