Stocktake: Markets may price in tax hikes under Biden

Biden’s tax hikes could cut S&P 500 earnings by 12%, Goldman Sachs says

Democratic presidential candidate JoeBiden has proposed partially reversing US president Donald Trump’s tax cuts. Photograph: Jim Watson/AFP via Getty Images

Democratic presidential candidate JoeBiden has proposed partially reversing US president Donald Trump’s tax cuts. Photograph: Jim Watson/AFP via Getty Images

 

Investors have learned to live with Donald Trump over the last 3½ years, ignoring his temper tantrums while lapping up market-friendly policies such as corporate tax cuts and deregulation. Consequently, stocks tended to rise and fall in line with Trump’s election odds, with markets taking a ‘Trump good, Democrats bad’ viewpoint.

That has changed since March, with stocks gaining even as Trump’s election chances continue to tank. Are markets ignoring rising political risk? Not only is Joe Biden looking increasingly likely to win November’s election, the Democrats’ chances of controlling the senate rose to 58 per cent last week, according to predictions market PredictIt. Biden has proposed partially reversing Trump’s tax cuts and a Democrat clean sweep – winning both houses of congress as well as the presidency – would make such a scenario increasingly likely.

Biden’s tax hikes could cut S&P 500 earnings by 12 per cent, according to Goldman Sachs. Nevertheless, the companies facing the biggest tax hikes had continued to rally, prior to last week’s belated sell-off. No doubt, markets would prefer Biden to Trump in many other respects. Still, corporate tax hikes are not immaterial, so this is an issue markets may start paying more attention to sooner rather than later.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.