This tax bill is rather Bigly.  It drops the Fed corporate tax rate by 40%(!), which brings the S&P 500 PE Ratio to around 18.6 (including an average of tacked-on local taxes), not far above the long term average (gee, it’s almost like the market knew this was going to happen).  However, the Shiller PE (which is more in line with our economic cycles) drops only to around 23, still a bit high according to historical averages, but probably not too high when one considers our current extremely low interest rates that are around only 60% of their long term average.  So a back of the napkin calc would bring the Shiller PE down to around 14, right in line with its long term average.  The same back of the napkin analysis brings the plain PE to ~11, pretty undervalued according to long term averages.  And none of this includes what could be some tremendous growth in the economy due to these changes …

Bigly.  🙂

Leave a Reply