S&P 500 Breaks 20-Year Record: 5 Best Buys

U.S. stocks continue to extend their winning streak with the S&P 500 carving its sixth straight record close on Oct 5, the longest since June 1997. The market value-weighted index also completed its eight-day long winning streak, the longest since 2013. The broad index has posted its 43rd record close in 2017 so far and is up 350% from the low hit in March 2009. In fact, the index has more than doubled in the decade ever since its pre-crisis peak of October 2007.

So, what has driven the S&P 500 higher? Investors cheered the first step toward enacting major tax reforms later this year after the Republican-controlled U.S. House of Representatives approved a 2018 budget resolution. Renewed optimism over tax cuts propelled the buying of assets perceived as risky, including financial and tech stocks.

Investors’ sentiments were also buoyed by narrowing of the U.S. trade deficit and rebound in exports, which might boost the economy in the third quarter. The U.S. economy is already growing close to the range projected by the White House, while both manufacturing and service sectors accelerated at a record pace last month. Banking on such bullish trends, investing in fundamentally sound stocks listed under the S&P 500 seems judicious.

House Passes $4.1-Trillion Budget

The House of Representatives, led by Speaker Paul Ryan, passed a $4.1-trillion budget legislation that paved the way for them to rewrite the much awaited tax code later this year. The budget aims to repeal Obamacare and also contains $1.1 trillion in non-entitlement outlays, including nearly $622 billion for defense.

The far-reaching plan will trim taxes for individuals as well as corporates. The tax plan aims to create three individual tax brackets with rates of 12%, 25% and 35%, while the corporate tax is expected to be slashed from 35% to 20%. These tax reforms will put the economy in overdrive, which will offset the revenue loss and not add to national debt that is now above $20 trillion.

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