This year 6200, next year 7500? Trump's policies may add fuel to the U.S. stock market!

Wall Street expects that the tax cuts proposed by President-elect Trump will significantly boost U.S. stocks and corporate earnings in the coming years.

Trump proposed reducing the corporate tax rate from 21% to 15%. Although this change is unlikely to have as huge an impact as the 2017 tax cuts (when the corporate tax rate was reduced from 35% to 21%), according to analysis by Morgan Asset Management, this tax cut plan could still affect about 145 companies in the S&P 500 index.

Meera Pandit, a global market strategist at the firm, wrote in a report: “Of course, domestic income is not a perfect indicator, as it does not reflect the origin of goods, but it can give a rough sense.”

The promise of lower taxes has made Wall Street bulls more optimistic, and strategists have rolled out higher stock and earnings forecasts in recent weeks.

Goldman Sachs stated that they believe Trump's tax cuts could increase S&P 500 corporate earnings by more than 20% over the next two years. Strategists noted that Trump's tax reform poses "upside risks" to their initial earnings forecasts.

Goldman Sachs forecasts the S&P 500 index's full-year earnings per share for 2024 to be $241, followed by an 11% growth in 2025, and a further 7% increase the next year, reaching $288 per share.

“We estimate that for every 1 percentage point reduction in the statutory domestic tax rate, all else being equal, the S&P 500 index's earnings per share will increase slightly by less than 1%,” strategists wrote in a recent report. They added that Trump's proposal to ease regulations in the financial sector could also promote corporate earnings growth.

Philip Orlando, Senior Vice President and Chief Market Strategist at Federated Hermes, stated that the proposed tax cuts could push the S&P 500 index to 7,500 points by 2026. His forecast implies that the benchmark index will rise by 27% over the next two years.

Orlando added that this also means the S&P 500 index is expected to reach 6,200 points by the end of 2024. He predicts that Trump's tax cuts and other market-friendly policies will benefit the stock market.

He said, “We still have some room for upside,” noting that the effects of Trump's tax cuts will take years to fully permeate the market and the economy. He stated: “The key point is that the rebound the market has enjoyed since mid-August or the week after the election seems to be a reasonable response to expectations of stronger economic growth.”

Since the results of the U.S. election were finalized, investors have been optimistic that Trump's policies, including his tax cuts, will enhance corporate profits in the coming years. Data from Bank of America shows that in the weeks following Trump's victory, assets related to the so-called "Trump trade" surged, with large-cap stocks experiencing the largest single-week inflow of funds in history, and financial stocks seeing the biggest inflow of funds in two years