During the last few days, the U.S. Congress took steps to move toward the passage of significant tax reform legislation. We believe its passage would represent a positive development for the stock market, but that the bond market may be negatively impacted. While passage is not assured, we estimate the probability of passage has increased to higher than 50%. And, if Congress is able to pass the tax reform bill, it is likely to have the power base necessary to pass an infrastructure bill which could authorize as much as $1 Trillion in infrastructure spending, which we believe would have long term effects similar to tax reform.
We have already positioned portfolios to reduce the negative effect of rising interest rates, and will continue to closely monitor the progress in Washington as well as the market’s reaction to any new developments in the legislative agenda.