Wall Street strategists are forecasting Trump’s tax cuts will send stocks soaring in the coming years

Wall Street expects President-elect Donald Trump’s proposed tax cuts to send stocks and corporate earnings soaring in the coming years.

Trump has proposed slashing the corporate tax rate from 21% to 15%. While the change is not likely to produce as big an effect as Trump’s 2017 tax cuts, which reduced the corporate tax rate from 35% to 21%, his tax plan this time around could still impact around 145 of S&P 500 companies, benefiting 18% of the market cap and 23% of all earnings in the benchmark stock index, according to an analysis from JPMorgan Asset Management.

“Of course, revenues derived domestically is an imperfect proxy because it does not reflect where goods are produced, but it can give a sense of scope,” Meera Pandit, a global market strategist at the firm, wrote in a note.

The promise of lower taxes has left bulls on Wall Street feeling even more optimistic, with strategists rolling out higher forecasts for stocks and earnings in recent weeks.

Goldman Sachs said it believed Trump’s tax cuts could boost corporate earnings for S&P 500 firms by more than 20% over the next two years. Strategists called Trump’s tax reform an “upside risk” to their initial earnings forecast.

Goldman’s forecast for full-year 2024 S&P 500 earnings per share is $241, followed by an 11% increase in 2025 and a 7% increase the following year, to $288 a share.

“We estimate that each 1 percentage point reduction in the statutory domestic tax rate would boost S&P 500 EPS by slightly less than 1%, all else equal,” strategists wrote in a recent note. Trump’s proposal to loosen regulation in the financial sector could also boost earnings, they added.

The proposed tax cuts could push the S&P 500 as high as 7,500 in 2026, according to Philip Orlando, the senior vice president and chief market strategist at Federated Hermes. His forecast implies a 27% gain for the benchmark index over the next two years.

Orlando added that it also puts the S&P 500 on track to hit 6,200 by the end of 2024. He forecast that Trump’s tax cuts and other pro-market policies will be bullish for stocks.

“We’ve got a little bit more juice to the upside,” he said, noting it would take several years for the effect of Trump’s tax cuts to fully work through the market and the economy. “The point is that the rally that the markets enjoyed from, let’s call it early-to mid-August into the election or a week past the election, appears to be justified based upon the expectations of stronger economic growth.”

Investors have been optimistic since the election that Trump’s policies, including his tax cut plan, are bound to boost corporate profits in coming years. Assets lumped under the so-called Trump trade soared in the weeks following Trump’s victory, with large-cap stocks seeing their largest weekly inflow ever and financial stocks taking in the most in two years, Bank of America data showed.