The 283 Days of Stock Returns after the 2016 Election

Abstract

The stock market rose by 25% between the 2016 election and the day TCJA was signed into law. To determine how much the prospect of tax cuts contributed to this increase, we construct a human-based attribution by examining non-public Market Intelligence from FRBNY for each of the 283 days during this period. We find that the prospect of tax cuts had a net impact of less than 1%. Corroborating evidence is provided by a machine textual approach, cross-sectional regressions including a newly constructed optimally-weighted measure of tax exposure, market-based probability measures, and a Gordon growth model

Keywords: Stock Market, Taxes, TCJA

JEL Classification: E00, E58, E60