Senator Marco Rubio and Senator Bob Corker announced they support the latest tax plan which gives it enough votes to pass. The final vote will be on Tuesday, but at this point the decision is known.

This helped the stock market rally briskly on Friday. The S&P 500 was up 0.9% and the Russell 2000 was up 1.65%. The VIX fell 10.2% to 9.42. The Dow was up 0.58%. It has been above its 100 day moving average for 401 days. That’s the 5th longest streak since 1896. The longest streak was 512 days in the mid-1950s.

With the tax plan providing a strong Santa Claus rally, it makes you wonder about how much more the stock market can rally because of the tax plan in 2018. If you believe in the efficient market hypothesis, then the stock market should have already priced the tax cut in. The stronger this rally is in the next two weeks, the less bullish the JP Morgan price target of 3,000 for the S&P 500 will look. In the spring of this year, many investment banks had to alter their price targets to adjust for the momentum in the stock market. This makes you question if the analysts just say they expect a 6%-8% increase each year without basing it on rigorous research. Some notable bulls went bearish this year only to get run over by the bull. With the economy doing well and sentiment high, it’s not surprising to see all the targets optimistic.

Finishing up the discussion on the tax plan, Rubio’s vote was secured by increasing the refundable tax credit from $1,100 in the original plan to $1,400. The chart below is a sensitivity analysis on the effect of the refundable child tax credit. This increase in the tax credit is exactly what I said would happen. It makes sense that Rubio would lobby for something he thinks he can get. It wouldn’t make sense to have an unrealistic negotiating stance unless he didn’t want to vote for it in the first place. You can tell McCain was never going to vote for the healthcare plan because he said he didn’t like the entire process it was about to be passed using. I would’ve been able to forecast how that plan would have been voted on if he would have made his position clear before the vote.