TOPLINE
If elected in November, Democratic candidate Joe Biden’s fiscal policies could have a major negative impact on companies’ earnings in the S&P 500, according to analysts at Goldman Sachs.
Presumed Democratic presidential candidate Joe Biden speaks at McGregor Industries on July 9, … [+]
KEY FACTS
Goldman researchers, led by David Kostin, expect Biden’s tax plan to cut his S&P earnings estimates by 12%, from $ 170 a share to $ 150 a share.
That estimate is based on several probable Biden policies, including raising the federal tax rate on national income by 7%, doubling the tax rate on certain foreign income, imposing a minimum tax rate of 15%, and creating an additional tax. on the payroll for those who earn more. .
Investigators also expect Biden’s fiscal policy to create a drag on earnings that’s comparable to the boost companies saw after the 2017 Tax and Job Reduction Act (and the accompanying corporate tax benefits).
Goldman analysts say the chance of a Democratic sweep in the fall has increased “substantially” since February and is now above 50%.
Key background
Trump’s tax cuts, which Biden promised to reverse in 2019 by enacting $ 1 trillion in new corporate taxes, are widely seen as a major factor driving explosive stock market growth that has led to the Dow Jones Industrial Average and S&P. 500 at record levels. . Growth has even persisted despite the coronavirus pandemic: even after large losses in March, the S&P had recovered all of its losses and turned positive for the year in the second week of June. Those tax cuts are part of the reason why many wealthy investors and executives supported President Trump, even if they did not express that support in public.
What to look at
The second quarter earnings season begins this week. The corporate performance of the last quarter will provide crucial information on whether or not the economy is recovering after the global closure in the spring.
Further reading
Wall Street begins to silently warn of a Biden presidency (Forbes)
Trump accuses Biden of ‘plagiarizing’ his economic policy (Forbes)
Biden presents the ‘Buy American’ recovery plan. Trump’s proposal is still in process. (Forbes)
In the midst of a severe recession, Trump’s advantage over Biden over the economy has evaporatedForbes)
