Tax Deal Spurs Citi's Levkovich to Raise S&P 500 Forecast

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Lower corporate taxes look like a done deal to Citigroup Inc. chief U.S. strategist Tobias Levkovich after Senate Republicans passed the bill. He raised his 2018 target for the S&P 500 to 2,800 from 2,650, saying a reduction in the corporate rate to 21 percent could add $8 a share to corporate earnings.

Levkovich joins a growing list of Wall Street strategists in predicting that Donald Trump’s overhaul will bolster corporate profits sooner than expected. David Kostin at Goldman Sachs Group Inc. last month bumped up his S&P 500 forecast by 350 points to 2,850, citing the progress on corporate taxes. Earlier this week, almost half of those surveyed by Bloomberg cited lower taxes as one reason they’re bullish on stocks next year.  

“The possibility of a blow-off rally does exist but we doubt that a repeat of 1999’s exuberance is probable,” Levkovich wrote in a note to clients.

U.S. equities have advanced over the past month, sending the S&P 500 to record highs, as the tax bill gathered momentum. Strategists on average expect the benchmark index to reach 2,845 by the end of next year, a 6.5 percent gain from its last close, data compiled by Bloomberg show.

Futures on the S&P 500 rose 0.3 percent as of 8:48 a.m. in New York.

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