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The outcome of the US elections is yet to be finalized, but the uncertainty surrounding the US elections did not scare investors. US stocks rose sharply for three consecutive days on Wednesday (4). Most of Wall Street that accurately predicted the stock market decline in March said this reflects reversal. People value tax reform stimulus bills even more.
Democratic candidate Biden has held the lead all along, but the gap between him and incumbent President Trump has widened and narrowed from time to time. The Trump camp has even filed legal action to count the votes. The US elections are still unclear for a while.
Before the general election, the market expects a “blue wave” from the Democratic Party to enter the White House and control the Senate and House of Representatives. The new government will promote large-scale tax expenditures to stimulate the economy, which is seen as beneficial for the stock market. Now that the outcome of the elections is uncertain, the stock market continues to rise.
The S&P 500 Index was up 2.3%, the Dow Jones was up 1.3% and intraday gain hit 700 points at a time. The Nasdaq Composite Index was most likely to rise 3.85%, led by technology stocks.
CFRA chief investment strategist Sam Stovall said the stock market rally on Wednesday may be because the market is now expecting the Democratic Party to raise taxes and implement new regulations. Biden has said that he will override the 2017 Republican Party policy of reducing the corporate tax rate to 21%, increasing the corporate tax rate to 28% and increasing the wealth tax.
Stovall said it appears that no matter who enters the White House, the stock market will go up, but the reasons for the increase are different than for ethnic groups. “If the threat of regulation and spin-off is reduced, technology stocks will perform better; if the government launches a large-scale stimulus and expands infrastructure spending, industrial stocks and commodities stocks will perform well.”
Barry Bannister, Director of Institutional Equity Strategy at Stifel, said the gap between the two candidates is too small to see who is the winner, but the Republican Party can retain the majority in the Senate. Splitting the government means that if Biden is elected, it can be difficult to keep his campaign promises and withdraw Trump’s. Reduce corporate tax policies.
Bannister said: “Dividing government officials to raise taxes is no longer an option on the table; if the tax increases, the EPS of S&P 500 companies in 2021 is estimated to be reduced by 10%. At the same time Over time, the economy will recover due to large-scale tax expenditures. The possibility of “reflation” (reflation) is reduced; although it has not disappeared, this scenario will benefit value stocks but will depress the EPS of S&P 500 companies So we currently prefer growth stocks. “
Bannister said both Trump and Biden are supporters of higher spending. Thus, who is in charge of the White House is less important to the stimulus plan than the Senate, and Senate Republicans have always opposed appeals from Democrats and the Trump administration. Greater fiscal stimulus.
Since the election of the US elections, the Republican Party leads the Democrats in the Senate. The House of Representatives is still the Democratic Party, but the number of seats has been slightly reduced.
Stifel originally predicted that if the Republican Party retains its lead in the Senate, the S&P 500 will face a sell-off due to the reduced possibility of a full-scale stimulus plan, but now it seems investors are more interested in low tax rates. and they are confident that the Fed will rescue the market in times of crisis.
Bannister said: “Investors seem satisfied with the prospect of Republicans taking over the Senate and the prospect of no tax increases. They know that if financial aid comes later, they can count on the Fed to sell power. (a metaphor that the central bank will take action when the stock market crashes). To support asset prices) “.
Bannister now predicts that the S&P 500 Index will rise to 3,800 points next spring, which means there is about 10% higher from Wednesday’s closing price. The index closed at 3,443.44 on Wednesday (4th).
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