As expected, the biggest news this week was the passage of the tax reform package in the United States. On Wednesday, the senate passed the sweeping tax reform package that makes big promises to corporations and individuals.
As soon as they passed the bill, companies started making promises. AT&T promised to pay a bonus of $1,000 to about 20,000 employees while Wells Fargo announced a bonus and an increase in hourly wages.
The bill is now waiting for Trump’s signature.
As you recall, the stock market has gained significantly this year on hopes of a tax cut and deregulation. Now, with the passage of the bill, and with all the deregulation efforts the administration has carried out, the question is; what will drive the stock market growth? Remember, investors always buy the rumors and sell on the news.
I believe the stock market could see a correction in the coming year. As rates rise, and with no major news on the horizon, the implications could be significant.
The chart below shows the impressive Bull Run that happened this year.
In other news, this week, the price of bitcoin and other cryptocurrencies dropped by about 25%. This happened following a series of bad news. First, the CME became the second big board to list bitcoin futures. But, the volume that was traded was insignificant as large funds started to explore how to benefit from the currencies.
Then, a large South Korean exchange filed for bankruptcy after being hacked by reportedly North Korean agents. As if that was not enough, U.S based coinbase started an internal insider trading investigation after bitcoin cash sharply increased minutes after launching.
All the negative headlines were not beneficial to the currency, which is highly volatile which saw a 25% decline. Traders bullish on the currencies however will have an opportunity to buy the dips.
In Europe, the Catalans went to regional elections. As you recall, the Catalan region has been calling for secession from the larger Spain region. Their win in the regional elections led to significant movements in the markets with the Euro falling sharply against the dollar. In addition, European futures markets fell as the Catalan situation presented new risks.
This week also, the European Union conflict with Poland escalated. As you recall, Poland has been on a judicial purge, which has not played out well with their EU counterparts. As a result, the EU leaders have stated that they will start the ‘nuclear option’ form of punishment.
This leads to the question, could we see as Polixit in 2018? Odds are increasing.
Another hot topic this week was on Israel and Palestine situation. On Thursday, in response to the Trump’s plan to recognize Jerusalem as Israel’s capital, the UN held a vote condemning the United States. Most Arabic countries voted against the US with Ambassador Nikki Haley threatening to reduce the country’s funding to the UN.
This conflict is far from solved. In fact, the rebuke of the United States could lay a case for a U.S exiting or significantly reducing its funding to the UN. Early this year, Judge Napolitano, a Fox News contributor and a man who has Trump’s ear asked him to move the headquarters to Zimbabwe and turn the UN building into condominiums.
We will continue to monitor this issue in the coming year.
This week, several economic data was released. However, the data was not very important in the market with volumes thinning and with investors already knowing what to expect from the central banks.