Market Overview

Analysis: Here's What Washington Is Likely To Accomplish By Years' End

Analysis: Here's What Washington Is Likely To Accomplish By Years' End

The SPDR S&P 500 ETF Trust (NYSE: SPY) is up nearly 19 percent in 2017, and much of the rally has been driven by news out of Washington. According to one Wall Street analyst, there are still plenty of political fireworks to come between now and the end of the year.

The Analyst

Height Securities analyst Stefanie Miller.

The Thesis

Tax reform is the top priority in Washington at the moment, and its potential outcome could impact other market-moving issues on the agenda as well, Miller said in a Monday note.

Investors should expect a new version of the tax bill sometime midweek, as Republicans update the legislation and prepare to vote on a final version, she said

“The final bill will need to walk that delicate balance of achieving both the political and budget requirements to pass both chambers of Congress one more time." 

Miller said investors shouldn’t expect much from the tax reform conference committee meeting Wednesday, which Miller said she expects to be a glorified photo opportunity. 

By Thursday or Friday, Miller said the conference committee should meet to hold a vote on the final bill to send to the House and Senate.

At the same time, Congress will continue to debate a new government spending package ahead of the new Dec. 22 government shutdown deadline. Tax reform will likely capture most of the headlines while the spending package takes the back seat, Miller said. 

The week of Dec. 18-22 will be critical for the markets, according to Height Securities. 

“We see a path to resolution of both the tax reform bill earlier in the week and government funding legislation later in the week," Miller said. 

Price Action

The 2017 rally suggests investors have high expectations for the tax reform bill. As Republicans have made more progress on proposed tax cuts, the S&P 500 has gained another 2.8 percent in the past month. 

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