How fiscal policy impacts equity and bond returns is an open question. Unlike previous studies, we address this issue in a way that decomposes current returns into news about cash flows and news about discount rates. Moreover, we use narrative methods to identify plausibly exogenous shocks to...

The stock market rose by 25% between the 2016 election and the day TCJA was signed into law. To determine how much the prospect of tax cuts contributed to this increase, we construct a human-based attribution by examining non-public Market Intelligence from FRBNY for each of the 283 days during...

We provide a critical theoretical and empirical analysis that suggests a key driver of fiscal effects on equity markets is the Federal Reserve. For the Post-1980 era, tax cuts lead to higher cash flow news and higher discount rates. The discount rate news tends to dominate such that tax cuts are...