Week In Review 11 10 2017

U.S. equities ended the week lower, pulling back Thursday after the Senate tax plan was released. Small companies took a harder hit than their larger counterparts, as they are viewed as bigger beneficiaries of a tax overhaul.

Senate Republicans released their vision for a tax-cut plan on Thursday, diverging in some key ways from a bill drafted by House Republicans. The House plan would consolidate the current seven individual tax brackets to four, while the Senate would maintain the seven brackets, with lower rates for most brackets. The threshold for exclusion for the estate tax would be doubled under the House Bill, and eventually repealed in 2025. Under the Senate plan, the estate tax threshold would be doubled, but with no plan for repeal. The corporate tax rate would be cut from 35% to 20% under both plans; the House calls for the cut in 2018, while the Senate plan would delay the cut until 2019. These, among other differences, will need to be resolved before a bill is passed into law.

President Trump attended the 21-country Asia Pacific Economic Cooperation (APEC) meeting last week, which proved to be a somewhat combative summit between the U.S. and its Pacific partners. Mr. Trump and Chinese President Xi Jinping laid out dueling remarks at the summit, Trump delivering a vision for country-to-country bargaining between the U.S. and Asia, stating that he will “make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and will abide by the principles of fair and reciprocal trade.” Chinese President, Xi, on the other hand, praised multicountry treaties.

457 S&P 500 companies (91%) have reported third quarter earnings as of Friday, 74% of them beating earnings estimates. Similar to last quarter, the market has rewarded positive earnings surprises less than average, and punished negative surprises more, due in part to hesitation from investors to push already high valuations even higher.