Wall Street is starting to doubt that Trump will deliver on his massive tax cut

One of the central economic promises of President Donald Trump's young administration is a large corporate tax cut. But according to a note from the equity-analysis team at Jefferies, Wall Street isn't buying that it's coming anytime soon.

The Jefferies team says that stumbling blocks such as divisions in the Republican party over the American Health Care Act - the bill to repeal and replace Obamacare - and recent reports about the possible tax plan from the Trump administration should inspire a healthy dose of skepticism.

"It doesn't require copious research to conclude that tax reform will be challenging to pass," said the note. "Disagreements over Border Adjusted Tax, the failed Healthcare Reform bill all point to a steep road ahead."

According to the Jefferies team, there is also a simple way to see that investors are discounting the possibility of a large tax cut coming anytime soon.

"We looked at the S&P 1500, divided it into sectors and then quintiled each sector by tax rate," said the note. "If investors had been piling in to tax reform beneficiaries, you'd expect the high tax rate companies to have performed best, but just the opposite has happened - low tax rate companies have not only outperformed, but those companies have performed better than any other quintile."

Put another way, stocks of the companies with the least to gain from tax reform have performed the best since the election and those that have the greatest to gain have performed the worst. Additionally, the divergence between the two has recently increased since the legislative faltering over the AHCA.

Given the recent news around tax reform, it isn't hard to see why.

Trump repeatedly promised to slash the federal tax rate to 15% from the current 35% during the campaign. However, since the election, Trump's plan has hit a few stumbling blocks and undergone a few revisions.

Trump first told manufacturing CEOs on February 9 that he was lowering the tax rate to between 15% and 20% instead of a hard 15%. But, the AHCA failed to pass, which would have repeal Obamacare's taxes and made it easier to lower the tax rate.

Then, Andrew Ross Sorkin of the New York Times reported on March 28 that the Trump administration was working off 20% corporate tax as their base for any reform plan and were considering a rate as high as 28% after the AHCA misstep.

Add all of this up and it's not hard to see why people are skeptical of the possibility of a massive tax cut coming anytime soon.