Republicans will end the year with the passage of their tax overhaul plan. The new law lowers the corporate top marginal tax rate to 21% and provides additional deductions for some pass-through entities. For most individuals, the filing process should be simpler with a lower tax bill. The hope is that new growth, spurred by increasing investment and wages, will offset increased deficit projections. A revised GDP growth estimate for the third quarter came in at 3.2%, slightly lower than the initial indicator but still a solid reading. Earlier in the week, President Trump announced a new national-security strategy that will focus on guarding against unfair trade practices from Russia and China.

U.S. stocks held and added to their gains for the year with the passage of the new tax bill. Small cap stocks posted nearly a 1% gain for the week, while emerging market stocks were the biggest winner – up over 2%. Emerging market currencies were boosted by a flat dollar and rising commodity prices. Yields rose last week with the continued strength in economic growth, the tax overhaul passage, and a continued expectation that the Fed will reduce stimulus next year. The 10-Year Treasury yield landed just below the 2.5% level. In turn, most bond funds dropped last week with floating rate and emerging market bond funds being the category exceptions.