Earlier last week I referenced IRS data stating that 65% of people earning over $500,000 were self-identified as Democrats.  Since Thursday’s proposal of increasing the capital gains tax to over 43%, I have observed a sharp change in Bloomberg news wire’s attitude towards the President.  Prior to last Thursday it appeared a default medium for financial information was unambiguously pro-Administration.

Yesterday the Administration proposed ending the “stepped up cost basis” on assets and the elimination of the carried interest loophole as well as the funding of pensions that are unfunded via various taxes on overfunded retirement accounts.  While the call for taxing unrealized capital gains has yet been proposed by the Administration, according to Bloomberg it is an idea that has been presented by several members of the President’s Party.

Some of the remarks on Bloomberg about these proposals were similar to the remarks that were formerly reserved for President Trump.

Wow!  Talk about velocity of change!!

While most believe the likelihood of passage of any of the above as slim, the President is proposing policies that many thought he would oppose believing Biden would govern as a moderate.  The next question will his support and ratings crater?

Increased taxes will impact earnings and according to Goldman Sachs if the Administration’s proposals become law, 2022 S & P 500 earnings may decline 8% to 10% which would then dictate lower valuations.

Today is the conclusion of a FOMC meeting.  Will the Committee comment about any of the proposed tax policies?   Little change is expected in monetary policy.

Commenting about earnings, of the 149 S & P 500 companies 87% beat analysts’ estimates.  Revenues have exceeded 65% of the time.  The mega sized technology has been a mixed bag.  Expectations and valuations are lofty thus shares have struggled.

What will happen today?

Last night the foreign markets were up.  London was up 0.51%, Paris up 0.62% and Frankfurt up 0.40%.  China was up 0.42%, Japan up 0.21% and Hang Seng up 0.45%.

The Dow should open mixed ahead of the Fed meeting, top tier data and earnings releases.  A new variable that is entering into the discussion is the impact of the President’s tax plans.   The 10-year is off 5/32 to yield 1.65%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.