• Email Us: [email protected]
  • Contact Us: +1 718 874 1545
  • Skip to main content
  • Skip to primary sidebar

Medical Market Report

  • Home
  • All Reports
  • About Us
  • Contact Us

Analysis-Clashes over taxes, debt limit challenge rally in U.S. stocks

September 14, 2021 by David Barret Leave a Comment

September 14, 2021

By David Randall and Lewis Krauskopf

NEW YORK (Reuters) – Investors are ramping up their focus on Washington, as the twin prospects of a tax hike and a potentially prolonged fight over raising the debt ceiling loom over a rally in U.S. stocks.

Democrats in the U.S. House of Representatives on Monday proposed raising the top tax rate on corporations to 26.5% from the current 21%, and increasing income and capital gains taxes on individuals making above $400,000 as part of a plan to rollback former President Donald Trump’s signature tax bill passed in 2017.

Those measures could spell trouble for sectors such as technology and healthcare, where many investors are likely sitting on outsized capital gains, while also leading to tax-motivated selling near the end of the year as households attempt to lock in lower capital gains rates, said Margaret Patel, senior portfolio manager at Wells Fargo.

“This will have to come out of stock market valuations, there’s no two ways about it,” she said.

If Congress fails to raise the $28.5 trillion debt limit, meanwhile, it could lead the government to default on its payment obligations.

Most analysts believe such an outcome is unlikely, but worries are likely to increase if a deal isn’t reached soon. U.S. Treasury Secretary Janet Yellen warned earlier this month that cash and “extraordinary measures” being used to finance the government temporarily will be “exhausted” during October.

Developments in Washington may add yet another challenge to a rally in U.S. stocks that has so far rolled on despite worries over everything from a COVID-19 resurgence to surging inflation, bringing the S&P 500 to a roughly 19% gain this year and a near double from its March 2020 lows.

Still, some analysts have already started factoring taxation into their calculus on company earnings.

Jonathan Golub, chief U.S. Equity strategist at Credit Suisse, cited the likelihood of higher taxes as one factor in his decision in late August to lower his forward price to earnings estimate for the S&P 500 from 21.4 to 20, reflecting a $10 hit to earnings per share of the index for 2022.

Goldman Sachs, meanwhile, cut its earnings per share estimates for the S&P 500 by 5% on Monday based on the assumption that the corporate tax rate will rise to 25%, slightly below the 26.5% proposed by House Democrats.

More broadly, a bevy of Wall Street banks have recently warned that the market is due for a pullback, citing worries over everything from valuations to ebbing growth.

At the same time, investors are also gauging the odds of a nasty debt ceiling fight.

“It is an under-appreciated risk by the markets and it is probably one of the bigger potential volatility catalysts we see here in the next couple of months,” said Mike Stritch, chief investment officer at BMO Wealth Management.

Many are mindful of 2011, when the United States on Aug. 5 lost its top-tier AAA credit rating from Standard & Poor’s after a fierce political battle over the debt limit, contributing to a 17% drop in the S&P 500 from early July through early August of that year.

Political wrangling in October 2013, which led to a government shutdown, also jostled stocks, with the S&P 500 falling about 4% over a few weeks before bouncing back.

Democrats, who are trying to enact a $3.5 trillion domestic investment plan, hold only a slim edge in Congress. The Senate is effectively split 50-50, with Democrats holding the majority due to Vice President Kamala Harris’ tie-breaking vote, while Democrats hold 220 seats in the House of Representatives compared to 212 for Republicans.

“There are a lot of balls to juggle here over the next several weeks and I don’t think the equity market has really priced in the potential risk,” James Ragan, director of wealth management research at D.A. Davidson.

(Reporting by Lewis Krauskopf and David Randall; Editing by Ira Iosebashvili and Chizu Nomiyama)

Source Link Analysis-Clashes over taxes, debt limit challenge rally in U.S. stocks

David Barret
David Barret

Related posts:

  1. Golf-Garcia, Lowry and Poulter made captain’s picks for Europe’s Ryder Cup team
  2. Japan’s vaccines minister Kono favoured as next PM in opinion polls
  3. Hit to oil output from Ida overshadows demand impact, says Goldman
  4. Nigeria says 75 abducted children released amid army crackdown

Filed Under: News

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

  • First Visible Time Crystals Ever Made Have Astonishing Complexity And Practical Potential
  • “Something Undeniably Special”: The Chi Cygnids, A New Five-Yearly Meteor Shower, Peak This Month
  • A 200-Meter-Tall Event We Didn’t See Sent Signals Through The Earth For Nine Whole Days
  • Why Are So Many Volcanoes Underwater?
  • In 1977, A Hybrid Was Born In A Zoo. What It Taught Us Could Save One Of The Planet’s Most Endangered Species
  • How To Park A Dangerous Asteroid So It Doesn’t Bite You Later
  • New Study Finds Evidence For What Every Parent Knows About Bluey
  • New Breakthrough Takes Plastic Garbage And Turns It Into Tool For Carbon Capture
  • NASA To Hold Press Conference About New Perseverance Rover Discovery Tomorrow
  • Strange Halos Have Formed Around Barrels Of Chemicals Dumped Off LA’s Coast Over 50 Years Ago
  • As We Grow Older, Our Music Taste Appears To Narrow To Fewer Songs
  • Stinky Seaweed Blob On Florida Beaches Thwarts Baby Sea Turtles’ Dash To The Ocean
  • NASA Is Set To Lock Up Four Volunteers For 378-Day Mars Simulation Study
  • For The First Time, A Vital Oceanic Upwelling Of Nutrient-Rich Water Failed To Emerge In 2025
  • One Of The Largest Crocs Ever “Terrorized Dinosaurs” With Teeth The Size Of Bananas
  • US Congress Is Holding Another UFO Hearing Today – Watch Live
  • Yes, Flying Snakes Do Exist – Sort Of
  • Meet The Bumblebee Bat: The World’s Smallest Bat Is The Last Of Its Kind
  • Did A Giant Planet Sculpt Fomalhaut’s Stunning Ring Into Its Squashed Shape?
  • The Unfolding New Astronomical Revolution – Gravitational Waves Discovery Turns 10
  • Business
  • Health
  • News
  • Science
  • Technology
  • +1 718 874 1545
  • +91 78878 22626
  • [email protected]
Office Address
Prudour Pvt. Ltd. 420 Lexington Avenue Suite 300 New York City, NY 10170.

Powered by Prudour Network

Copyrights © 2025 · Medical Market Report. All Rights Reserved.

Go to mobile version