Why a Medium Risk/Lower Return Bull Market Still Lies Ahead

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Capital Market Line

A decade after the global financial crisis, economies have largely healed. Gradually restored growth and pricing power have given central banks the green light to withdraw their extraordinary post-crisis monetary accommodation, a historical oddity that fostered high returns with low risk. In the US, two forces now at work are replacing the waning monetary stimulus. First is the 2017 tax cut, which was far more balanced in relief given to business than either the Reagan or Bush II cuts, which were overwhelmingly aimed at individuals to stimulate demand. Since corporate tax competitiveness stimulates supply, albeit with a lag, this tax bill should provide a more sustainable economic boost than the “sugar high” of a temporary demand surge