Wall Street is protecting itself from tax hikes in Biden’s new stimulus plan
As soon as President Joe Biden’s $ 1.9 million stimulus package was passed, attention was drawn to the next big spending bill for infrastructure – and the tax hikes they are likely to pay.
For equity markets, increases in corporate taxes proposed by Democrats to fund $ 2 tn package it could quickly become expensive, according to analysts ’forecasts. Goldman Sachs estimated that Biden’s tax plan would cut 9% of its shares in S&P 500 companies next year.
Under Biden’s plans set out last week, the U.S. corporate tax rate would rise from 21 percent to 28 percent, a reverse change from the cuts extended in Donald Trump’s presidency. The proposal would add a global minimum tax of 21 percent, specified by country, to be channeled to tax havens.
Communication services and information technology are likely to be one of the biggest losers in the tax package, given the sector’s higher taxes on foreign business. Goldman expects both to have a 10 percent profit gain next year from the jump in corporate and global tax rates. The bank’s calculations were based on the plan outlined in the presidential campaign, including similar tax increases.
Especially for tech groups, higher taxes are another blow, until recently, to a sector that was based on an unprecedented rally On Wall Street. Savita Subramanian, head of US equity and quantitative strategy at the Bank of America, says technology stocks have come under pressure this year increasing borrowing costs, which greatly reduce the value of future cash flows that are heavily included in the sector’s high-value passenger ratings.
“This suggests to me that these are areas of markets that are more risky than they are for a while,” Subramanian said.
So far, however, it seems that markets are not writing about tax increases, said Mike Mullaney, director of global market research at Boston Partners.
“Taxes will go up,” Mullaney said. “We still don’t know how much they’ll look like.”