How vulnerable is the stock market?

Weekly Market Review: Conflict over tax reform shows that US stocks may be primed for a dip

By Kristina Hooper, Global Market Strategist

Last week saw the US Senate introduce its version of the tax reform bill, which caused some concern among investors. The Senate version of the bill delayed the much-anticipated corporate tax cut until 2019. In addition, because it has some significant differences from the House bill, it raised uncertainty about Congress’ ability to pass tax reform this year — or at all. This helped push US stocks lower, which in turn helped to push stocks outside the US lower. Additionally, the VIX (while still relatively low) rose. While last week saw just a small drop for stocks, this activity called to mind a prediction made by Treasury Secretary Steven Mnuchin several weeks ago, warning Congress that if the tax bill is not passed, stocks would experience a “significant” drop.

This begs the question: how vulnerable is the stock market? And, if it is vulnerable, what could cause a correction...

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