Tax Hikes: The Market Says, “Meh”

The opening salvo in the tax debate has been fired. The salvo concluded on Thursday with a proposal suggesting a top tax rate on income of 40.8% and 23.8 on capital gains for those making over $1 million dollars a year. This follows a proposal to raise the corporate tax rate to 28% from 21%. So the cards are on the table for all to see. Based on the rhetoric and media preceding these proposals one would have expected the market to go completely into the tank. Well it did, kind of, if you can call it that.

stack of papers flat lay photography


Thursday, April 22, we had a brief 1.4% decline (a swing from positive to negative on the index) in the S&P 500 when the proposal was issued. This was followed on Friday with 1.09% gain in the index, up 45 points on the day. At one point we were up almost 60 points registering  a new all-time, intra-day high in the S&P 500. What a lot of pundits and media had feared would be a major problem for stocks appears not to be (at least for now). As of this moment (with all cards face up) it did not even make a ripple. The market’s reaction was “meh.”

Oh yes, I said it was Friday, recently a day where we have seen weaker markets as traders take money off the table, always fearful of unsettling news (positive or negative) hitting the market while it is closed over the weekend. From my perspective this was a pretty startling performance versus what I had expected it might be and a good omen for what I continue to believe is a secular bull market.

“Is this all there is?”

Has the Biden administration hit us with their best shot? My guess is that it is and that it is a great positive. The game is that you go in with a high number from which you can negotiate down. Nonetheless, as this process continues there will be lots of ink, video and bytes expended on reasons why this issue should be at the top of the list of things to worry about. Don’t let ’em scare you out of your stocks. At worst this will be an offset to the nearly $5 trillion  worth of stimulus we will have received in the past 12 months. There is no way they take it all.

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Disclaimer: The information presented here represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain ...

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