Death & Taxes.

“That’s one small step for rich people and corporate ‘citizens’ and one giant leap for Republicans who can’t get shit done”…

Vote

So that’s the first step, next up is the Senate where lawmakers are arguing about crafting their own version. House Ways and Means Committee Chairman Kevin Brady told reporters on Thursday afternoon that the House is now preparing for a conference committee with the Senate. All but one of the Republicans who voted against the bill hail from high-tax states.

Here are the Republicans who voted no:

  • From Calif.: Darrell Issa, Tom McClintock, Dana Rohrabacher
  • From N.J.: Rodney Frelinghuysen, Leonard Lance, Frank LoBiondo, Chris Smith
  • From N.Y.: Dan Donovan, John Faso, Pete King, Elise Stefanik, Lee Zeldin
  • Other: Walter Jones of N.C.
  • Of note, vulnerable Va. Republican Barbara Comstock voted for the measure, as did Tom MacArthur, the only member of N.J. delegation to do so

“We are in a generation defining moment for our country,” Paul Ryan proclaimed, speaking from the House floor prior to the vote. “What we’re doing here is not just determining the kind of tax code we’re going to have — what we are doing here is determining the kind of country we’re going to have.”

Yes, “what we are doing here is determining the kind of country we’re going to have.” And in that regard, don’t forget that this will disproportionately benefit the wealthy while some in the middle class will actually end up paying more. So that’s “fun.”

Best day for stocks in more than two months (best day for big-cap tech since the late October earnings blowout, record highs on the Nasdaq):

Stocks

The dollar didn’t really respond – perhaps fatigue with this process has set in or maybe it’s the fact that the fate of the bill is still far from certain – while 10Y yields meandered around as everyone tried to make sense of a drop in import and export prices, lackluster claims data, and an industrial production number that was hopelessly distorted by hurricane effects:

DollarYields

On the dollar, it’s worth noting that a “soggy” greenback is one of Goldman’s top 10 themes for 2018. To wit:

With the US unemployment rate continuing to fall and wage growth picking up, the Federal Reserve looks poised to continue raising interest rates in 2018: our US Economics team expects four hikes next year. But rate hikes need not translate automatically into Dollar appreciation in the context of healthy global growth. During the last tightening cycle from mid-2004 through mid-2006, for example, the FOMC hiked at 17 consecutive meetings, taking the Fed Funds rate from 1% to 5¼%. Over this same period, the trade-weighted Dollar fell by about 7%, weakening against both G10 and EM currencies (Exhibit 7). In hindsight, we can see that favorable developments outside the US likely resulted in the appreciation of other currencies — improving terms of trade from higher commodity prices, falling risk premia, and risk asset outperformance. While there are important differences, this period may be a good template for USD performance in the current market environment.

GSDollarSoggy

Junk bonds rebounded on the session, with communications spreads 19bps tighter – broadly the market was 11bps tighter on the day. Bloomberg’s Luke Kawa tweeted the following visual:

Going to Thursday, investors had yanked nearly $4 billion from retail junk funds WTD, the most since mid-March. Still, the primary market looks to be open.

Are you looking to add to your list of things that are going to zero sooner or later (a list that should already include Bitcoin)? Well this is going to zero:

2s10s

Energy stocks fell today as crude continues to exhibit signs of angst about U.S. production and inventories. It didn’t help that Norway plans to sell some $35 billion in energy shares from its giant, $1 trillion SWF.

Energy

You can see the moment the Norway headline hit in the following chart of the Stoxx 600 oil and gas index:

Stoxx

Speaking of Europe, shares rebounded after a seven-day skid that had lopped some 400 billion euros off the Stoxx 600. Here’s the Stoxx 50 and the DAX:

DaxStoxx

Notably, emerging market equities broke out of their slump, soaring after falling for five straight days:

EEM

The tone was set in Asia overnight where the Nikkei got off the mat, rising 1.5% after a six-day slide:

Nikkei

Oh, and on that tax plan, don’t forget this…

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