Tax Reform, Central Bank Meetings Finish and Holiday Season’s Strong Start

Doubt Cast on Tax Reform Bill

With a handful of Republican Senators still “Undecided” on the current Tax Reform Bill that party leadership agreed on, Senator Marco Rubio (R-FL) cast doubt on the bill, when he commented on the Child Tax Credit.  “I want to see the refundable portion of the child tax credit increased from its current number,” Rubio told reporters earlier in the upper chamber. “If it stays at $1,100, I’m a no. Let’s hope it doesn’t.”  It remains unclear if Rubio is posturing for a better deal or he will go against the wishes of the Party Leadership and The Trump Administration on this version of Tax Reform.  Sen. Bob Corker (R-TN) was the lone Republican to vote against the first bill and does not appear to be a supporter of this version.  In addition to Senator Rubio, other Republicans with concerns on the current bill include Senator Susan Collins (R-ME) and Senator Mike Lee (R-UT). However, late in the day, President Trump said he was “Very Sure” Senator Rubio would vote “Yes”.

 

Retail Sales Strong and Central Banks

Heading into the Holiday Season, retailers should be feeling good about the increase in consumer discretionary spending. Spending has increased on both staples and discretionary year to date, with discretionary spending outpacing staples by 10%. Consumers seem to be confident that 2018 will lead to more money in their pocket. Central Banks across the world concluded their meetings this week with more optimism than we have seen in some time. Yesterday’s Fed Projections signaled that the US economy was on strong footing and called for three rate hikes in 2018. The ECB remains a key Central bank to watch, as Mario Draghi remains cautious about removing any of the current monetary stimulus.

 

 

Equities down, Crude Up

Treasury prices experienced little changed on the day, while all three major stock indices were marginally lower.  While retails sales were a boost to Equity markets early, uncertainty around Tax Reform erased any gains. The swap curve flattened about 2bps on the day with the front end selling off slightly and the long end experiencing little change. Crude was up on the day on conflicting information about supply. Production in the US remains high in the face of some other oil producing nations continuing to curb their supply, supporting prices.