The most highly-taxed stocks in the US enjoyed a double-digit rally following the election on expectations that Trump would lower the corporate tax rate. During the campaign, the president suggested lowering the rate to 15% from 35%, a cut that would have an outsized impact on companies paying the most.
However, Since the election, Trump has backed off his 15% goal, telling manufacturing CEOs on February 9 that it would be "15% to 20%." Additionally, reports suggest that the tax plan could end up with a corporate rate as high as 28%.
Also, Treasury Secretary Steven Mnuchin originally set a deadline of August for the tax overhaul, but Trump, Mnuchin, and top economic adviser Gary Cohn have walked back that promise.
This shift has led to skepticism regarding the promised, said Bridgewater Associates. In a client note on Wednesday, co-CIO Greg Jensen and senior investment associate Atul Narayan said they see the tax rate landing closer to 25%, and are generally anticipating "less impactful tax reform."
Also, count Bank of America among the non-believers. The firm conducted a survey, published on Wednesday, finding that 21% of fund managers see a delay in US tax reform as the biggest tail risk to economic growth, more than double from the prior month. As an extension of that, the number of fund managers expecting faster global growth over the next 12 months is "rolling over," according to the note on the survey from Michael Hartnett, BAML's chief investment strategist.
A 50-company basket of highly-taxed companies maintained by Goldman Sachs climbed as much as 14% following the election through March 1. However, as skepticism around Trump's proposed measures has mounted, the gauge has since fallen 3.6% from March 1 through Wednesday's close.