Two weeks ago we laid out a detailed scenario from JPMorgan explaining how Biden’s proposed hike of the capital gains tax and dividend income from 23.8% to 43.4% – under a Blue Sweep scenario – would hammer not only risk assets as investors rushed to sell before having to pay higher cap gains, some time in 2022 when the new tax law would most likely come into effect…
… but also small and medium private M&A activity, which would be pulled sharply forward for the same reasons, and which we have already seen in action as we reported last week in “Fears Of Biden Capital Gains Tax Hike Spark Avalanche Of Private Company Sales“.
In any case, JPM’s assessment was that while there would be some forced selling ahead of the tax rollout, as “we are likely to see some downward pressure in equity markets in Q4 2021, i.e., in a year’s time” over the longer term stocks would continue to rise simply because “equity markets have increased in value over time. Some stocks, sectors or styles do better at some times than others, depending on specific, often unpredictable factors—a fact that underlines the importance of diversification. That is why, to ensure the long-term health of one’s portfolio, we think that time in the market, rather than market timing, is key. Consequently, we advise clients to stay invested, regardless of specific events—including election results.”…
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