Newspaper article THE JOURNAL RECORD

The Impact of Tax Reform / Stock Market Poised for Year-End Rally Due to Tax Reform Changes

Newspaper article THE JOURNAL RECORD

The Impact of Tax Reform / Stock Market Poised for Year-End Rally Due to Tax Reform Changes

Article excerpt

NEW YORK - With a late spate of tax-related selling apparently out of the way, the stock market could be poised for a typical year-end rally in the final days of 1986, analysts say.

But although stocks in recent years have tended to post moderate gains in year-ending sessions, some Wall Streeters think the trend could be blunted this year by a lack of fundamental market strength.

The market weathered some pre-Christmas weakness early this past week in a wave of selling prompted by the impending tax law changes. The new law, which becomes effective Jan. 1, raises the long-term capital gains rate, and this past Tuesday was the last day to make sales that investors could be certain would be settled before midnight Dec. 31.

Later, as trading slowed sharply going into the holiday weekend, the market rebounded to recover much of the ground lost in the days before.

``I feel the maximum selling pressure on the market has probably peaked, and I think we'll get the old cliche year-end rally,'' said Michael Metz of Oppenheimer & Co. Inc.

At the close on Friday, the Dow Jones industrial average was at 1,930.40, up 1.55 from a week earlier.

The New York Stock Exchange composite index fell 1.51 to 141.14, and the American Stock Exchange market value index dipped 1.36 to 264.10 on the week.

Big Board volume averaged about 122.65 million shares a day, against 170.84 million a week earlier.

One factor favoring a year-end rally is history. Analyst Phil Roth of E.F. Hutton & Co. Inc. notes that most tax-related selling typically is completed by Christmas, with the market rallying in the final days of the year.

According to the Stock Trader's Almanac compiled by Hirsch Organization Inc., the market has failed to rally during the final four days of the year only seven times in the last 33 years - 1955, 1966, 1968, 1977, 1979, 1981 and 1984. …

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