Wall Street has been banking on new tax legislation before the end of the year.
The increased likelihood of a vote on the U.S. tax bill this week has bolstered strong gains for the market of late.
Details of the legislation released late last week suggested the corporate tax rate will settle at 21%. But just how much would a tax cut affect stocks?
According to Fisher Investments, not a whole lot. Using data from 1925 to 2004, Fisher found that on average, stocks don't move very dramatically with a cut in the corporate tax rate.
When there's a tax hike, the S&P 500 was on average down 0.2% in the 12 months prior to the change. For the 12 months following the hike, the index gained an average of 11.1%.
A corporate tax cut had smaller repercussions than a hike. While the S&P 500 moved higher 9.8% in the 12 months ahead of a cut, it gained an average of only 4.1% in the 12 months following.
In the last 12 months, the S&P 500 has rallied about 19%.
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