Here’s Where Strategists See the S&P 500 With and Without a Tax Cut

How Markets Are Pricing In Sweeping Tax Cuts

Speculation Donald Trump’s tax cut will pass has been rising along with equity prices. A question remains: how much is priced into the market? A look at projections from Wall Street strategists may offer hints.

Among a dozen strategists tracked by Bloomberg, five have cited lower taxes as one reason why they’re bullish on stocks next year. Others, while excluding the tax impact from their forecasts for now, consider it a potential catalyst.

The table below presents estimates from strategists for where the S&P 500 will finish 2018 and how much profit companies will generate - with and without the bill’s passage.

Firm StrategistIndex LevelEPS Index with Tax ImpactEPS Boost
BofASavita Subramanian(a)2,800$139 Up to $19
BMOBrian Belski 2,950$145$10
CanaccordTony Dwyer2,800$140 3,100 $15
CitiTobias Levkovich (b) 2,675$1412,800$8
Deutsche BankBinky Chadha2,850$1463,000  12%
Evercore ISIDennis DeBusschere3,000 $146Same Same
Goldman David Kostin2,850 $150Same Same
Jefferies Sean Darby2,855$148.14-5%
JPMorganDubravko Lakos-Bujas3,000$153Same Same 
Morgan StanleyMike Wilson (c) 2,750$145Same Same 
StifelBarry Bannister2,750 $137.5Same Same 
UBS Keith Parker (d)  2,900$1413,3007-9%

a. Subramanian expects a large portion of the benefit to be passed through to customers
b. Levkovich’s 2,675 forecast based on 25% tax rate versus 21% proposed by Republicans
c. Wilson’s S&P 500 target based on 2019 EPS estimate of $150
d. Parker sees the tax effect on EPS materializing in 2019, yet market may start pricing it in next year

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