Alger On the Money - Small Caps May See Big Gains Under New Tax Proposals
02 June 2017
Some proposals by the new administration and House of Representatives Republicans lower corporate tax rates, making U.S. tax rates more in line with global peers.
How can you benefit as much as possible from the potential change?
- Small caps have outperformed large caps since the election. However, the category can
maintain positive momentum if either the new administration’s proposed corporate
tax rate of 15% or the House of Representatives Republican corporate tax plan of 20%
- Small caps generate a larger percentage of revenues and profits from the U.S. than large
caps and, therefore, will likely benefit more from lower U.S. taxes. It is estimated that a ten
percentage point deduction in the statutory rate would boost large cap earnings by 8%
versus 12% for small cap companies.
- Additionally, small caps tend to outperform large caps in a rising rate environment—
something we have seen following the presidential election.