Tax Hikes Are Coming

End of the month and first quarter of 2021. Is time going fast or slow? Markets have been moving at a dizzying pace to start the year.

As a side note, this will be our last newsletter for this week because the market is closed on Friday (Apr. 2).

The first quarter of 2021 is officially almost finished. Time flies when you’re having fun, right? While a broad correction did not happen by now, as I expected, the Nasdaq did enter correction territory twice since February. Despite the Nasdaq’s muted moves on Tuesday (Mar. 30), it’s right on the edge of its third foray into correction territory.

The market themes remain. There is still as much uncertainty for tech stocks today as there were at the start of March. Until there’s some clarity on inflation and bond yields, I can’t foresee this ending anytime soon.

Consider this too. President Biden is about to unveil a $2 trillion infrastructure plan during Wednesday’s session (wasn’t it supposed to be $3 trillion?). While this is great for America’s crumbling infrastructure, let’s be honest- does this economy, while recovering, need anymore spending?

Plus, how do you think he will pay for this? Hiking taxes- namely corporate taxes. Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. The market may have priced in a lot of optimism. It may have already priced in some pessimism from potential inflation. But one thing it has not priced in is a possible tax hike.

This concerns me.

Rising bond yields + Rising taxes= A double whammy of bad news for tech stocks.

However, despite the “what ifs,” for now, three pillars remain in motion as a strong backdrop for stocks:

  1. Vaccines
  2. Dovish monetary policy full of stimulus
  3. Financial aid

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

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Disclaimer: All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be ...

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