Taxes Going Up – Bears Get Selling
The stock market continues to trade heavy without much magnitude on the downside so far. The WHY isn’t important as you know market reaction is much more so. In a perfect world, as I wrote the other day, I would like to see one more decline to new lows for the week and then a reversal to the upside to begin a run to new highs. That bottom could be the offing next week.
Biden and Congressional Democrats seem lined up to raise corporate taxes and capital gains taxes on the successful and jobs creators. The only question is how much to get all 50 Senators onboard. As you know this is not something I support. My argument is not that we already pay enough or too much in taxes. That is already a fact. My argument is that everything is always about the revenue side. The United States doesn’t have a revenue problem; we have a spending problem. How about we get rid of subsidies and special tax treatment to level the playing field? Then go after fraud.
Ranting aside, if I knew taxes were going up with 100% certainty, the time to do that is when the economy is humming and could stand to weaken a bit without jeopardizing the expansion. You can determine if that’s now or not.
Although I love to rail against raising taxes, the data don’t support the hike causing impending economic doom nor a market calamity. It absolutely does matter and leaves less money in the system, but it’s not the unmitigated disaster that many forecast. Again, at least that’s not what the evidence suggests.
The idiotic part being discussed is making it retroactive to April when the Biden administration first floated the idea. While the Supreme Court ruled that it’s legal, it is certainly unfair. Forget about selling your few thousand shares of Apple. It’s grossly unfair to those with illiquid assets like real estate or small businesses. Some of may think I am whining because I have those illiquid assets ready to sell. That’s 100% false. I do, however, have clients in that boat and they should not be penalized.
Anyway, stocks continue their mild pullback although the media and pundits certainly make it feel the decline has been much worse than it has. Given the tax backdrop and quadruple options expiration today, I would be very surprised if the stock market closed green today. But hey, I have been wrong before and I will be wrong again, probably before I get this posted.
Next week is seasonally the weakest week of the weakest month. I will write more on Monday, but I wonder aloud if investors have been frontrunning the anticipated weakness.
As I quickly reread this, I definitely come off a little cranky. Don’t I know it’s Friday? It’s pretty much par for the course for me the day after Yom Kippur when we fast without food and drink for 26 hours to atone for our sins. I think I was fairly well-behaved over the past 12 months. Could I get a pass? 🙂