By the time Joe Biden was inaugurated on January 20, there were already whispers of tax increases on the way from Democrats controlling the House and Senate. On Thursday, Joe Biden's team - via leaked advance information to Bloomberg (the usual suspect) - crushed markets when it was revealed that Biden's administration would seek to raise capital gains taxes as high as 39.5 percent, nearly doubling from the current 20 percent.
There's also information circulating that Biden will propose raising the top income tax rate to 43.4% from the current 39.6%.
The news sent not just stocks, but precious metals and cryptocurrencies tumbling. The Dow Jones Industrials, which were down just 10 to 20 points as of 1:00 pm ET, fell off a cliff, dropping 240 points in a matter of minutes as the report from "anonymous sources" hit the news wires. It only got worse from there, sending the Dow to its third loss this week. Wednesday's gain was nearly equal to the losses on Thursday.
The same was happening over at the NASDAQ, S&P, and NYSE, which all suffered damaging, though not fatal losses. Other markets were also affected negatively. Gold finished down nearly $10 on the day, closing out the NY session at $1783.90. Silver lost 44 cents, finishing at $26.11.
The crypto market was stunned, as Bitcoin fell below $50,000 for the first time since early March, hitting a low overnight at $47,464. Most altcoins, including Etherium, also suffered losses in the range of seven to 20 percent.
As markets prepare to close out the week Friday morning, stock futures are barely clinging to gains, although Dow futures are already in the red as of 8:15 am ET. Bitcoin has recovered to just above $50,000, but gold and silver are both up sharply.
International markets were affected, though Asian markets appear to have shrugged off the damage on US stocks. European stocks are mostly lower in Friday's trading.
The news that tax hikes are on the way sent a serious message to investors, though the timing and the fact that the reporting is still unsourced speaks to a little gamesmanship in the inner circles of finance. Stunning markets in such a manner is one way to shake out weak hands and, if that was the intention, it worked like a charm.
It remains to be seen whether the Biden team's plans will come to fruition, as most, if not all, senators are primarily funded by wealthy individuals and corporate donors. It would be working against the interests of the entire Senate should these massive tax hikes become reality.
Of course, any tax increases would not take effect until next year, when returns for 2021 would come due. This is a test for markets and investors to see if the market has finally topped out or whether it can recover and move on to new highs.
Thank your Democrat oligarchs for putting a melancholy edge to the end of the week.
AT THE CLOSE, THURSDAY, APRIL 22, 2021:
Dow: 33,815.90, -321.41 (-0.94%)
NASDAQ: 13,818.41, -131.81 (-0.94%)
S&P 500: 4,134.98, -38.44 (-0.92%)
NYSE: 16,030.62, -90.99 (-0.56%)
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