Today, President Trump begins a national tour to promote tax reform.  After the Obamacare replacement debacle, the White House wants to avoid another GOP letdown. I hope to hear details of the plan. Also, I am hopeful it’s presented in such a way that it will sail through rather than getting snared in the haggling and horse-trading that is Washington, D.C.  Read the fine print: it’s layered with goodies that will ultimately sink any effort.

Interestingly, as President Trump pushes for tax reform and tax cuts, the nation of Denmark is on the cusp of making its own historical tax cuts.  Denmark is known as the happiest country on earth. However, its massive welfare economy must find ways to get folks to work, which means rewarding work more and sloth less. The country’s 46.6% tax of the national Gross Domestic Product (GDP) is highest among The Organisation for Economic Co-operation and Development (OECD) nations.

Of course, the Danes take great pleasure in their societal aspects versus America, including:

• 52 weeks of paid parental leave
• 5 weeks guaranteed paid vacation
• 100% of the nation covered with health insurance
• One of the best GINI Coefficient readings in the world

On the topic of income inequality, there is a serious price to be paid when people are paid not to work; limited incomes and little wealth is generated. Billionaires along with billions of dollars are generated in America each year and society benefits in innumerable ways.

I’m glad America has rejected this path, but its remnants are marbled into society.

Some reports say 84% of the 750,000 welfare recipients in Denmark are from non-western nations. The country is looking to curb the tide and trim those numbers.  The fact is that open borders and rewarding people for not working make for a dangerous economic concoction; volatile and explosive. America grapples with this same problem, although to a lesser degree.

Now we have a chance to implement a tax system designed for growth without punishing prosperity.  It seems like a no-brainer with several combinations that could sail through the House and Senate and even garner some bipartisan support.

The Market

The resolve of the market yesterday was extremely impressive.  Not that another launched missile by North Korea or even a 1,000-year flood in Houston would change the country’s fundamentals, but the market appeared vulnerable. NASDAQ led the way, powered by biotechnology, which continues to surge on approval news and merger activity.

Overall, market breadth reflects a bifurcated market of distinct winners and losers –with little room in between.

Biotechnology

In the past few years, I expected big pharmaceutical companies to make sweeping acquisitions of biotechnology companies, but it hasn’t happened that way.  Instead, biotechnology names are merging among themselves in mega deals that underscore the potential to be the main source of new life-saving medicines.

The Biotech Index (IBB) is up 19.8% for 2017 versus 9.2% for the S&P 500. This momentum should continue for the remainder of the year.

Let’s see what happens with the ADP Employment data today. I’m optimistic, and I must say this has been an even better week to be an American.

#TexasStrong.

America Strong(er)

Couple of major news releases this morning: ADP Employment Report and revised 2Q GDP. Both came in significantly better than expected. I will have detailed analysis in the note and tomorrow morning, but the initial reaction from the market is worrisome- equity futures have gone down. I’m not sure this is statement on the Fed or the street saying these numbers are good, but this point to peaks and not a longer-term trend.

Quicker economic growth and job creation are triggers for higher rates and inflation; and, there isn’t even a whiff of it in the air. Of course, higher rates in a growing economy is a good thing, so I’m not sure the knee-jerk reaction is about the Fed. Let’s see how the session shakes out before taking a financial hunch.

The trend during earnings season of knee-jerk selling no matter the quality of news continues to linger. I like markets that open under pressure and find a way to rally higher. We cannot underestimate the meaning of that 200-point reversal higher for the Dow yesterday.