Steve Beaman, economist and author of "The American Dream Under Fire," said stocks will rally if U.S. lawmakers change the tax code to help companies.
“In Washington they're talking seriously about cutting corporate taxes to bring some of that corporate capital back from overseas and I'm telling you that's a hugely bullish thing,” he told Ed Berliner, host of NewsmaxTV’s “The Hard Line” on Wednesday. “We've got valuations today, price-to-earnings multiples, for example, that are not expensive.”
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The tax-writing Ways and Means Committee of the House of Representatives last month said its top priority will be "international tax reform" after it returns from the summer recess on Sept. 8.
The Republican-controlled panel will consider giving C corporations a tax break on foreign profits; taking steps to halt C corporations from relocating overseas to cut U.S. taxes, and giving C corporations a tax break on intellectual property profits, according to Reuters.
“If you get the kind of stimulus we would get from a corporate tax cut, you could see this market run up significantly and that's what's got money coming into it,” Beaman said. “The other side of the coin is people are afraid if they don't do something we'll just kind of struggle along at this 2 to 2.5 percent growth rate indefinitely.”
The S&P 500 stock index
in August fell more than 10 percent from its record high of 2,134.72 reached on May 20. The correction in equity prices was partly attributed to China’s efforts to devalue its currency in an attempt to stimulate its slower-growing economy.
Beaman said China’s weakness will not derail global business activity.
“The reality is the United States is the largest most stable economy in the world,” Beaman said. “And it is still true that when we get a cold the rest of the world gets pneumonia. It is not true on the other side that when China gets a cold we get pneumonia.”
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