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Differences In Senate And House Tax Plans Weigh On The Market

The markets pulled back a bit on Thursday after differences emerged between the Senate and House tax plans.

The biggest contention that likely impacted the market the most was the Senate's floated proposal that the corporate tax cuts be delayed until 2019. I also heard the Senate's version would have a higher repatriation rate as well.

It will be shocking if the Senate screws this up where nothing can get done.

Granted, both chambers, because this is being done through reconciliation, have to ensure their tax cuts don't cause the federal deficit to increase by more than $1.5 trillion over the next 10 years. That will be tough. But that's what they all signed on for. Hopefully petty bickering will give way to sensible compromise and something meaningful gets passed!

But Congress continues to express optimism that this will get done, and by Thanksgiving.

I, for one, still believe this will get passed. Quite frankly, it's good for the country, good for the economy, and good for ordinary Americans. Plus, if the Republicans have any hope of getting re-elected next year, they absolutely have to get this done. And knowing their own self-interest is on the line, this (if nothing else) should compel them to act.

Fingers crossed.

When this does finally get done, I can envision a big relief rally ensuing.

But the smart money, in my opinion, remains bullish that tax cuts/reform gets done this year, without implementation delays, and the market continues its record advance.

Seeing how the markets came off of their lows by day's end underscores this optimism.

Best,

Kevin Matras

Executive Vice President, Zacks Investment Research

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