The latest data of the US consumer reflects that US economy is now convinced and discounted the June Fed Rate hike. This hike will obviously impact the economy in the long term. On the other hand US stock markets will now get the real picture of its valuation gaps since around $ 3trillion have been deployed to create new historic highs for the Dow Jones. Now with interest rates coming down easy money is no longer available and hence deployment has already started plunging.  

This is supposed to plunge further which is very much known to us. What we don’t know is that as buy back comes to a halt slowly we will find skeletons of many companies in the Dow Jones coming up as performance of numbers are pathetic. This will lead to slow down fall of the equity markets. Now the only trigger which was expected and also is being expected is the Tax Relief Proposed by Donald Trump which will give some leeway to the buy back as cash savings will go up for the companies. Don’t forget that Buy Back of Shares have been big game for the US markets post recession. So it’s quite impossible to let Dow Jones plunge. 

Hence it might take some time for Donald to come up with reforms in the Bills of taxation but he has to come up one day very soon. On the other hand repatriate trillions of dollars in overseas cash is another angle which will looked upon and might become reality since the same funds will be used to Buy Back shares which leads more growth for the Dow Jones. This inflow of capital will be sufficient to reward the share holders and make trillion out of the same. 

Currently for US investors its time to exit the Index ETF categories as buy back has less ammunitions hence a sell cant be ruled out. ETF flows, which have been strong all year, continued strong in April. Roughly $42 billion in net new money came in, which is roughly the same inflow we have seen every month this year. The four month total is now $170 billion, the highest level for inflows in the first four months. The inflows are based on the assumption that Dow Jones will scale new heights and hence buy back of shares and income tax cut down and repatriate trillions of dollars will spook the ETF returns. But unfortunately plunge is significant in buy back of shares . The only catching point is that Donald will come up with policies which will support the buyback of shares in replacement of Zero Interest rates. Well when US will cut down tax and why is very clear now.