The US president has just announced its eagerly awaited tax reform. Since American stocks have become very expensive, we have focused on what could impact the earnings of listed companies. Given the importance of Wall Street for the other market places, this is more than just an US issue
At first glance, lowering corporate taxes from 35% to 20% should boost profits. Yet with the effective tax rate for listed companies so far from the theoretical rate, the reality is not nearly so black and white. Plus, we are seeing major disparities, according to business sector, the share of international sales or the size of the companies. Against this backdrop, generalisations can be misleading. Ultimately only four out of ten sectors should benefit from the lower corporate tax rate. On the other hand, domestic stocks and small- and mid-caps should do very nicely.