Thanks to Trump’s pro-growth economic policies aimed at accelerating economic improvement, reducing regulation, increasing spending, slashing taxes, and boosting jobs and corporate profits, the U.S. stock market is in the midst of the second largest bull run this year. 

In fact, the major indices hit a series of fresh highs early this week on optimism surrounding the biggest tax overhaul in decades with the S&P 500 and the Dow Jones gaining about 0.6% and 2%, respectively, so far this month.

Santa to Bring a Bag Full of Tax Benefits

The tax reform cuts corporate tax rates to 21% from 35%, lowers individual tax rates and allows companies to bring offshore cash back home at reduced rates. A massive $1.4-trillion tax cut will create an economic surge, boosting job growth and reflation trade. It will further accelerate earnings, leading to increased dividend and buyback activities and paving the way for increased mergers and acquisitions.

After gaining approval from the Congress, the tax bill is now on its way to the White House for President Donald Trump’s signature, which is expected this week. It would be the key catalyst to stocks higher going forward. This coupled with the Santa Claus rally have turned the market super bullish for the last six trading days left this year.

A Santa Claus rally refers to the increase in stock prices in the final week of the calendar year (i.e. between Christmas and New Year’s Day) that extends into the first two days of the New Year. According to the Stock Trader’s Almanac, the Santa Claus rally has yielded average cumulative returns of 1.4% in 34 of the past 45 holiday seasons over the seven-day period since 1969.

This is especially true as year-end seasonal factors such as holiday optimism, tax-related affairs, investment of Christmas bonuses, mutual fund manager window dressing, and the “January effect” will push stocks higher. This makes December the best-performing month for the stocks.

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