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Donald Trump's 2016 election and his nomination of climate skeptic Scott Pruitt to head the Environmental Protection Agency drastically downshifted expectations about U.S. policy toward climate change. Joseph Biden's 2020 election shifted them dramatically upward. We study firms' stock-price movements in reaction to these changes. As expected, the 2016 election boosted carbon-intensive firms. Surprisingly, firms with climate-responsible strategies also gained, especially those firms held by long-run investors. Such investors appear to have bet on a “ boomerang” in climate policy. Harbingers of a boomerang appeared during Trump's term. The 2020 election marked its arrival.

Massive dollars shuttled back and forth among firms on the twisted path to and passage of the 2017 tax reform. Prices of individual stocks responded to the difference between initial and revised expectations. From the bill's initiation in the House to final passage, high-tax firms gained significantly, given the dramatic cut from 35% to 21% in the corporate tax rate. Internationally-oriented firms suffered notably, since investors assessed that the surprisingly high repatriation tax outweighed the benefits from territorial taxation. Daily price movements show that the aggregate market responded positively to lower expected taxes.

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