Corporate Tax Cuts

What we saw in 2017 and 2018 could largely be attributed to anticipation and execution of the tax cuts, mainly corporate tax rates being reduced from 35% to 21%.  With more and more baby boomers retiring and Social Security and Medicare expenses set to bust the budget, don't be surprised to see $2 trillion government deficits in the coming years.  It will require very easy monetary policy for it to not affect the US economy, as normal monetary policy wouldn't be able to tame the distorted supply demand dynamics such a huge deficit would create. 

If Democrats win in 2020, there will be quite a lot of pressure to raise taxes on corporations and the rich, especially considering many of the Democratic candidates are farther left than Obama. 

One of the reasons the US economy has outperformed Europe is because of the big budget deficits (combination of lower taxes and more spending) contributing to greater demand.  It hasn't had any negative drawbacks such as a much weaker dollar because of the interest rate differentials between the US and the rest of the developed world.  But when the US economy weakens, those interest rate differentials disappear as the Fed goes back to ZIRP, and the dollar will get much weaker.  It may seem like a weaker dollar would be great for the US, much like a weaker currency is great for Japan and Europe.  But the US is a massive net importer, so inflation in imported goods would be a big hit to consumption for the lower and middle class.  Remember in 2007 and 2008, the dollar was getting a lot weaker right up until the financial crisis hit in fall of 2008. 
Contrary to what many stock investors believe, a weaker dollar is not that good for the stock market as it hurts domestic consumption, offsetting a lot of the export benefits.

The past few days rally after the AAPL earnings bombshell are a combination of funds repositioning to more of a neutral stance, after de-risking in December, New Year equity allocation inflows, Powell turning back to being a stock market slave, and optimism about a US/China trade deal that everyone thinks is the magic elixir for this market.  Unlike most investors, the S&P will be more vulnerable to weakness after the trade deal, because it takes away a positive short term catalyst, without providing a fundamental change.  10% tariffs are relatively meaningless when China lets its currency weaken. 

Market is up again today after a weaker open, the FOMO trade is still on so be careful with shorts.  Its a tough market, trying to squeeze shorts and then squeeze longs.  Over and over again.