Lack of clarity over tax policy combined with swooning financial stocks dampened markets on Tuesday.

The Dow Jones Industrial Average carved out a slight gain in the final hours of trading to hit a new record, but the S&P 500 and the tech-heavy Nasdaq both closed in the red. Losses were kept in check by stellar earnings from health care and drug companies.

You think health care reform is hard? Try taxes.

Tax “reform” has a nice ring to it. But the devil is in the details. And when it comes to devilish details, it’s hard to beat the U.S. tax code.

Negotiations on the tax measure have begun in the House of Representatives. Everyone wants lower taxes and a fairer tax code. And traders understandably like the fact that the proposed package slashes the corporate rate to 20% from 35%.

But to find the money, the bill also eliminates several breaks popular with investors like you and me.

The tax bill could cause financial pain for retirees, by repealing many deductions and tax credits related to income investing and retirement plans.

The bill cuts the mortgage interest deduction in half. The building industry is up in arms. The state and local income tax deduction also is curtailed. Congressional representatives of high-tax states are howling.

To quote the song “Taxman” by The Beatles: There’s one for you, nineteen for me.

The bill probably will pass the House. But it faces a rough reception in the Senate. Here’s the good news: the best-positioned stocks are those that don’t need a tax cut to thrive.

Optimism still pervades Wall Street. Traders have stopped fretting about risks such as high valuations or North Korea. Still-low interest rates, solid earnings, low unemployment, and durable economic growth are keeping the long-awaited correction at bay.

There’s an old Wall Street adage: “Don’t fight the tape.” In other words, money is made in the stock market by being on the right side of the momentum. But investors want a better handle on tax reform. Until that happens, the market will lack a catalyst for another big upward move.

On Tuesday, bellwether financial stocks JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), and Goldman Sachs (NYSE: GS) all dropped sharply: -2.04%, -2.07% and –1.50%, respectively. The trigger was an influential analyst’s harshly negative assessment of Goldman Sachs. The Nasdaq was dragged lower by woes at online travel agencies. Let’s do the numbers.

Tuesday Market Wrap

• DJIA: +0.04% to close at 23,557.23
• S&P 500 -0.02% to close at 2,590.64
• Nasdaq -0.27% to close at 6,767.78

Tuesday’s Big Gainers

• Valeant Pharmaceuticals (NYSE: VRX) +17.03%

Drug maker’s earnings beat expectations on strength of Bausch + Lomb eye-care business.

• Expeditors International of Washington (NSDQ: EXPD) +7.91%

Logistics provider exceeds 3Q expectations.

• CVS Health (NYSE: CVS) +3.23%

Drugstore chain beats 3Q expectations amid talk of its potential purchase of health insurer Aetna (NYSE: AET).

Tuesday’s Big Losers

• TripAdvisor (NSDQ: TRIP) -23.22%

Online travel booking service misses on 3Q; Airbnb competition largely to blame.

• Priceline Group (NSDQ: PCLN) -13.52%

TRIP peer issues weak guidance.

• Skyworks Solutions (NSDQ: SWKS) -4.42%

Semiconductor player threatened by looming $103 billion merger of chip makers Broadcom (NSDQ: AVGO) and Qualcomm (NSDQ: QCOM).

Letters to the Editor

“The bull market keeps going, but risks are mounting. Should I start protecting my portfolio?” — Tom A.

If you haven’t implemented them already, defensive measures are required. An appropriate portfolio allocation now would be 35% stocks, 30% hedges, 25% cash, and 10% bonds. But the specific percentages depend on your stage of life and investment goals.

At least 5%-10% of your hedges should be in precious metals, notably gold. The Midas Metal historically outperforms during times of crisis.

Gold prices have been on an upward trajectory in 2017 and they’re likely to keep rising into 2018.

“Have energy prices recovered or will they plunge again?” — Mike B.

The energy sector has been fickle this year, encouraging investors one week and dashing their hopes the next. But recent optimism seems warranted. Supply-and-demand is approaching equilibrium. Economic growth remains on track. Glut worries are easing.

After a long slump, the price of crude oil appears to have found a floor. Prices of West Texas Intermediate and Brent North Sea crude now hover at two-year highs.

Got any questions or feedback? Drop me a line: mailbag@investingdaily.com — John Persinos

This Day in History

November 7, 1962: Republican Richard Nixon, after losing California’s gubernatorial race to Democrat Pat Brown, held what he called his “last press conference.”

In 1960, Nixon lost the presidential race to John F. Kennedy. After losing the race for the lesser position of governor in 1962, Nixon seemed washed up.

Never a friend of the press, Nixon lashed out at reporters by saying: “You won’t have Nixon to kick around anymore.’’ The phrase became infamous.

Fast forward 10 years to the same day: November 7, 1972. President Richard Nixon was reelected in a landslide over Democrat George McGovern. But on August 8, 1974, Nixon resigned in disgrace because of the Watergate scandal.

The lesson: “success” can only be measured over the long haul.

Number of the Day: $1.3 trillion

According to the Boston Consulting group, Millennials in the U.S. wield about $1.3 trillion in annual buying power.

The Millennial generation, born between 1980-2000, is now the largest generation at over 77 million. They outnumber their parents, the Baby Boomers. As a whole, they’re better educated than Boomers, a fact that corresponds with higher income.

Many Millennials came of age during the Great Recession of 2008-2009. They used the experience to revolutionize the job market. They helped create a “gig” economy that frees workers from corporate restraints. Their buying habits boost e-commerce.

As the Boomers downscale, Millennials will become the leading consumer force. Their rise is a powerful investment theme.

Quote of the Day

“One never knows, do one?” — jazz pianist and singer Fats Waller