There’s a new biggest bull on Wall Street now that Trump has signed tax cuts into law

Keith
Parker

Screengrab/Bloomberg

• UBS’ Keith Parker raised his year-end target for the
  S&P 500 to 3,150 from 2,900, citing the passage of the
  Republican tax plan. 
• His forecast is the
  highest among strategists at major Wall Street
  firms. 
• He expects the lower corporate tax rate to lift
  corporate profits by 7% this year.

UBS’ head of US equity strategy has raised his bullish
view on the stock market now that the Republican tax plan has
become law.

Parker increased his year-end S&P 500 target to 3,150
from 2,900, and has the
highest forecast among strategists at major firms. His
forecast is about
 16% higher than where the
index opened at an all-time high on Thursday, three trading days
into the new year. In his most optimistic scenario, Parker sees
the market going up to 3,330, by 22%.

“Positive economic data as measured by data surprise
indices has supported much of the recent return for US equities,
as earnings revision ratios for 2017 EPS (i.e. ex tax) have been
very positive and are the strongest since 2010,” Parker said in a
note on Thursday.

“However, the index also appears to be pricing in more of
the tax bill than it was in mid-December.”

Parker estimates that the S&P 500 has priced in 60%-70%
of the tax cut impact, based on how it’s traded since he released
his
previous outlook on November 14. 

He forecast that the lower corporate tax rate would lift company
earnings by 7.2%, excluding the effect of limits on interest
deductibility. And just like the tax repatriation holiday of
2004, Parker expects companies to do heavy buybacks and
acquisitions, which should also support earnings per share
growth.