Impact Of Tax Hikes On Stock Market

Don’t expect corporations to have extremely high margins and the stock market to rise as a percentage of the economy while the lower income group underperforms indefinitely. Many proponents of capitalism actually favor helping the lower class to protect the long term viability of the system. Many workers would support outright socialism if there were no social safety net or worker protections (minimum wage, labor laws, etc.).

Founder Led Companies

The current mantra among investors is that founder-led companies are superior because the CEO is mission-driven and probably has skin in the game. It’s a good story but doesn’t perfectly line up with the facts because many of the founder-led companies are growth-tech-oriented names. Because those names are in vogue, investors ascribe positive associations with some of their characteristics. The table below lists the successful founder-led companies. They might not do so well in a new market regime with higher rates and inflation. Back 10 years ago, many investors didn’t think founders were good leaders because they weren’t disciplined enough. Opinions change depending on the point in the cycle.

Conclusion

The economy is starting to heat up. That’s not the best news for cyclical stocks because it’s largely priced in. Of course, each company is unique. There could be some diamonds in the rough. Small businesses are about to do great in the next few months. We are already seeing signs of improvement. This is the promised land for businesses who lasted through the pandemic. Higher taxes are coming. This will make stocks more expensive than they currently look. There is a bias to prefer founder-led companies because it’s common for growth-tech firms to be led by their founders. Those stocks have done well in the past 10 years, so of course investors like this characteristic. They might stop liking it if tech falls out of favor.

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Disclaimer: The content in this article is for general informational and entertainment purposes only and should not be construed as financial advice. You agree that any decision you make will be ...

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