In just over six months, Americans across the country will go to the polls or mail in their ballots to determine who will lead our great country for the next four years.
Although many aspects of the presidency, and the legislative process in general, have nothing to do with Wall Street and investing, the changes to tax policywhich are usually written by Congress and signed into law by the president, TO DO impact on the health of the American economy and on the financial results of American companies.
As of the closing bell on April 24, incumbent President Joe Biden had secured 3,237 delegates in the presidential primaries. That’s well beyond the 1,968 delegates needed to secure the Democratic Party’s presumptive nomination for president. Since taking office on January 20, 2021, Biden has made gains of 23% in the iconic sector. Dow Jones Industrial Average (DJ CLUES: ^ DJI)32% in the benchmark index S&P500 (INDEXSNP: ^GSPC)and 17% in growth-oriented sectors Nasdaq Composite (NASDAQ INDEX: ^IXIC).
Similar to his predecessor, Donald Trump, Biden worked with a unified Congress controlled by his party during his first two years in the Oval Office, and with a divided Congress during the second half of his presidency (Republicans took the lead). control of the House of Representatives). Representatives on January 3, 2023).
But could a second term for Joe Biden, coupled with Democrats taking control of both houses of Congress, set stocks up for a gigantic crash? Let’s look at the challenges that Biden and a Democratic Congress would face and let history be the ultimate judge of things.
Will stocks collapse if Joe Biden wins in November and Democrats control Congress?
While it is impossible to accurately predict when a significant downturn will occur in the stock market, the impetus for a “crash” would likely come down to certain policy proposals from Biden and his colleagues, as well as certain winds economic opposites, which This could be awkward no matter who is elected in November.
Two policy proposals, in particular, could give Wall Street and investors reason to head for the proverbial hills. For starters, President Biden indicated during his State of the Union address in March that he wanted to quadruple the stock buyback tax to 4%. Companies buying back their own shares have helped increase their earnings per share (EPS), which has played a key role in increasing valuations. Quadrupling the existing buyback tax would make stock buybacks less attractive and negatively impact earnings multiples at a time when stocks are quite expensive.
The other proposal that could knock the Dow, S&P 500 and Nasdaq Composite off their respective pedestals is to increase the top marginal corporate tax rate from 21% to 28%, as well as the minimum tax rate alternative of companies from 15% to 21%. . Not only would companies be discouraged from buying back their shares, but they would have less disposable income to work with if companies…
