US stock indices and UK firms with exposure across the pond are in buoyant mood after the Senate passed a bill offering corporate tax cuts aimed at boosting economic growth (3 Dec).

Companies including equipment hire business Ashtead (AHT), building materials play CRH (CRH), plumbing and heating products specialist Ferguson (FERG), which all derive a significant chunk of their revenue in the US, moved higher on the news while the Dow Jones Industrial Average closed at a new record high above 24,000.

AJ Bell investment director Russ Mould says there are three key underlying measures which can help judge if the US market rally is on borrowed time, being the performance of the Dow Jones Transportation index, the SOX semiconductor index and the Russell 2000 small cap stock index.

Encouragingly, he notes the performance of the Russell 2000 remains strong. However, the Dow Jones Transportation index covering airlines, trucking and rail firms, which should benefit in a buoyant economy as more goods are shipped, was lagging the market before a big gain in late November.

Finally, the SOX index, covering manufacturers of the tiny semiconductors used in a growing variety of different products, has taken a recent tumble.

‘Whilst none of these indicators are yet a screaming sell signal there is enough uncertainty here to suggest investors in the US market should be watching their portfolios carefully and considering when might be the right time to bank some of the handsome profit they could have made over recent months,’ Mould says.

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