Stephen Gandel – Bloomberg Gadfly
Stocks Are Already Counting on a Tax Cut for 2018
Summary: Wall Street analysts are betting big on tax reform. With tax reforms included, current estimates have the S&P trading at a 17.5 price to earnings (P/E) ratio. Without reforms, current price targets would put that ratio at 19 times earnings. Additionally, corporate profit expectations change significantly with and without reform. S&P 500 earnings are projected to increase 12% next year, which could justify a 19x P/E ration, but without tax cuts, the projections drop to 3.5%.