Stocks will be neutral no matter who wins presidential election: David Lefkowitz
UBS GWM Head of Americas Equities David Lefkowitz discusses his outlook for the markets amid the presidential election.
Democratic presidential nominee Joe Biden’s proposed capital gains tax hike would be a “minor speedbump” for a stock market poised to continue higher, according to Goldman Sachs Group.
Continue Reading Below
The former vice president has proposed to use a Democratic sweep to raise the top tax rate on capital gains and dividend income to 43% from 24%. Goldman estimates America’s wealthiest households are sitting on about $1 trillion of unrealized gains.
“History shows stock prices fall, equity allocations decline, and momentum underperforms ahead of increases in the capital gains rate,” wrote a team led by David Kostin, chief U.S. equity strategist at Goldman Sachs. “Any potential selling will be short-lived and reversed in subsequent quarters.”
STOCKS HISTORICALLY WIN IN THIS ELECTION SCENARIO
The chances of a blue wave are better than not with one week to go until Election Day, according to prediction markets. Traders on the betting platform PredictIt are pricing in a 53% chance the Democrats sweep. Superforecaster predicts there is an 85% chance Biden wins the election and a 76% chance the Democrats win both the House and the Senate.
Relative outperformance of high tax stocks versus low tax stocks suggests a 61% probability of a blue wave, according to Goldman. The firm also notes potential beneficiaries of infrastructure spending have also seen recent strength.
Proposed spending put forth by the Biden-Harris campaign would boost 2021 S&P 500 earnings by 13% over the four-year term, the analysts said, helping mitigate the impact of higher taxes.
TRUMP ELECTION WIN IS BEST CASE FOR STOCKS: JPMORGAN
Past tax hikes have proven to induce stock-market selling.
America’s wealthiest households unloaded 1% of their equity stakes, worth about $100 billion in current terms, in the three months ahead of the last major tax hike in 2013, Goldman said. However, that weakness was temporary as wealthy investors re-upped their exposure in the following quarters. Similar patterns were observed following the previous two tax increases.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
“Regardless of who wins the election,” stocks will climb about 10% by the middle of next year, Goldman said.
Source: Read Full Article