The Vanguard Financials ETF (NYSE:VFH) was down 0.52% shortly after the end of the noon hour on October 30th. The ETF opened the week down after news hit that U.S. tax reform could be introduced gradually. The Republican-controlled House have discussed a gradual phase-in of corporate tax-rate cut that would see the rate drop to its target 20% by 2022.
Some of the concerns for representatives include fiscal stability as the plan pitched by the Trump administration will put additional strains on the U.S. debt. The administration has argued that the resulting growth that will come after tax reform will more than make up for the increase in debt and loss of tax revenue.
The largest stock exposure in the Vanguard Financials ETF include shares of JPMorgan Chase & Co., Wells Fargo & Co., and Bank of America Corporation. U.S. bank stocks and financial institutions have boomed following the 2016 election of Donald Trump. The incoming administration promised to implement pro-growth policy including the momentous tax reform that is currently pending.
The ETF has increased 13.2% in 2017 and 33% year over year. The cut in corporate rates from 35% to 20% is expected to produce a tremendous windfall of cash into the U.S. Tax reform is still facing opposition even within Republican circles as lobbyists move to secure respective tax breaks. It does, however, appear that the Trump administration is on track to achieve its first legislative victory before 2018.
If tax reform does pass, the Vanguard Financials ETF will likely end 2017 and start 2018 on a very positive note.