Equities could be in line for a serious correction should US tax cuts fail to be enacted, according to the US Treasury.
The day after the Dow Jones Index stormed through the 23,000 level for the first time in its history, US Treasury Secretary Steven Mnuchin warned that tax cuts were built into equity valuations.
However, in a podcast for Politico, Mnuchin also predicted that equities would likely rally further if Trump´s plans to overhaul taxes were enacted.
Trump´s agenda to both cut taxes and increase spending has buoyed the global economic outlook since last November´s presidential election.
Nonetheless, so far the president has been frustrated in his attempts to win congressional backing for key policies, including his plans on controversial reforms for the healthcare system.
Mnuchin also talked up the chances of getting the tax reforms in place.
While some US companies currently pay as much as 35% in corporation tax, Trump has pledged to cut the rate for US business to 20%.
Republican senators also want to simplify the US tax system by reducing the number of tax rates from seven to just three.