The obvious affect of changes to U.S. tax codes would be an increase in profit margins for numerous U.S. companies. TAXR’s portfolio includes some of the higher tax payers that would benefit disproportionately more than other U.S. companies such as Caleres, Teradata, Ameren, Brown7 & Brown and more.

Lower corporate taxes also raises the competitiveness of U.S. exporters compared to international companies abroad since U.S. exporters can price exports at a more competitive starting point, which carries over the distribution chain. These exporters include those like AK Steel Holding, Advansix and Benchmark Electronics, among others.

Lastly, tax reform measures include expensing capital investments upfront and partially limiting corporate interest deductions, so companies would pay less taxes initially then more later once assets are paid off. This has historically helped fuel investment spending and increased demand for capital goods. The higher capital expenditures would benefit companies like Air Lease, CarMax and Southwest Airlines, among others.

For more information on alternative index based strategies, visit our smart beta category.