According to Wall Street strategists, the record-breaking stock market that President Trump will inherit from President Trump is in danger of selling after the inauguration.
An important economy reform concerns for tax hikes and higher interest rates are likely to become the driving force for markets later this year.
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Bank of America Chief Investment Strategist Michael Hornett wrote, “The possibility of inaugural reform on peak policy, profits and positioning.”
In Trump’s term, the S&P 500 is the index’s third-largest annual gainer as president of the index, with a 13.73% annual rate, or 67.26% increase, as investors celebrate the tax cuts and rolling back of regulations Celebrated The benchmark index, which set 150 records under Trump, ended down 0.6% during the last full trading day of his term on Tuesday.
Meanwhile, the Nasdaq Composite Index posted 24.17% annualized returns, the largest under a president since the inception of exchanges in 1971 during the Nixon administration. The tech-heavy index produced 183 records during Trump’s four years in the White House.
“Markets are determined to perfection,” said US policy strategist Greg Welier, head of Toronto-based AGF Investments.
Biden vows to raise the top corporate tax rate to 28% 21%. The rate was introduced as a part of Trump’s Tax Cuts and Jobs Act, which encouraged US corporations to bring in $ 1 trillion of foreign cash from home.
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Other tax changes are being considered, increasing the top tax rate on capital gains and dividends from 24% to 43%, and also raising income taxes for those with the highest incomes.
In addition to higher taxes, investors will have to grapple with the implications a red-hot US economy will have on interest rates.
Goldman Sachs forecasts US GDP to grow at a 5% annual rate in the first quarter of 2021 and a 5.8% rate for the year, boosted by the recently approved $ 900 billion COVID-19 relief package. If Congress passes the $ 1.9 trillion package, the economy could grow at an even faster pace, which Biden proposed last week.
A model by the Federal Reserve Bank of Atlanta that takes into account recent economic data shows that the economy grew at a 7.4% annual rate after growing at a record 33.4% in the third quarter during the fourth quarter of last year Has grown from COVID-19 reopen after lockdown.
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The euphoria over the economic recovery has created panic in the bond market, where US Treasury sales have resulted in a 10-year yield climb of 0.515% to X% on Tuesday from 415. The Federal Reserve has taken out a rally, reiterating its resolve to keep interest rates near zero through at least 2023.
Valeriar said he would not be “shocked” to see 10-year yields. Yields reaching 1.5% by summer and reaching 2% warns will be “a concern for the stock market”, which saw a relentless bid to sidestep the Fed’s promise and talk of additional fiscal stimulus from Congress is.
According to Dow Jones market data, the price-to-earnings ratio of the S&P 500 is currently trading at 27.4, compared with a historical average of 17.6.
Anthony Saliba, CEO of the Chicago-based Matrix Execution Group, is a broker-dealer specializing in options markets and options. “There is more demand for calls than supply.“
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The proprietary indication of calling versus waiting suggests that investors are choosing not to buy a security that is usually done to guard against a negative move.
Saliba, who outperformed the market before and after the elections, admitted that nothing was pointing to imminent vicissitudes in the stock market, yet he was still on the lookout Fast move less.
“I think you get through the inauguration, you see the infighting between the Democratic Party and then I think people say, ‘Maybe I can take advantage of something better,” Saliba said.