White House chief economic adviser Gary Cohn predicted Wednesday that the stock market's seemingly endless bull run rally has more more room to charge higher.
"I don't think a lot of the tax reform is in the stock market," Cohn said in an Axios interview.
"If you look at what the tax plan is going to do, I don't think it is factored in," he argued. "So I think there is a lot more momentum in the stock market."
Ironically, Wall Street’s main indexes were flat at midday Wednesday, taking a breather after a month-long rally and as U.S. Treasury yields rose as a bill to cut $1.5 trillion in taxes progressed toward the finish line.
The Republican-controlled U.S. House of Representatives gave final approval to a sweeping tax bill which will be the largest overhaul of the U.S. tax code in 30 years. The Senate has already voted in favor of the bill.
Cohn, formerly the No. 2 executive at Goldman Sachs, noted the stock market's price-to-earnings multiple isn't that expensive relative to the economy's fundamentals, CNBC explained.
"The stock market is reflecting the reality of what's going in the business environment today," said Cohn, director of the National Economic Council. "There is going to be a continuation [of the] rally in the equity markets based on real underlying fundamentals of the U.S. economy ... as well as companies having more earnings power because of lower tax rates."
Cohn also predicted companies will invest more in their business and hire more workers as a result of the tax reform bill, CNBC reported.
The proposed changes include cutting the corporate tax rate to 21 percent from 35 percent from Jan. 1, which could boost company earnings and pave the way for higher dividends and stock buybacks.
The S&P 500 has climbed about 4.7 percent since mid-November when the House passed the bill, led by a rally in sectors such as transport, banks and others that are expected to benefit the most from lower taxes.
Some market analysts say the market has already priced in the approval of the tax bill, Reuters explained.
“We rallied a lot on sort of a non-event and there is a little bit of head scratching about what’s really new that we should be rallying on,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.
“There is no news to take us higher in terms of stocks, part of it could be rotation out of bonds and maybe some nibbling at stocks that perhaps people think will perform well in 2018.”
(Newsmax wire services contributed to this report).
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