People walk near the Wall Street Charging Bull statue on July 23, 2020 in New York City. Stocks rallied in President Biden’s first 100 days despite promising to raise taxes for corporations and wealthy investors and to get tougher on Wall Street. Michael M. Santiago / Getty Images Hide caption
Michael M. Santiago / Getty Images
Michael M. Santiago / Getty Images
President Biden wants to levy taxes on businesses and corporations wealthy investors. Its top market regulator has promised a tougher approach. And leading Democrats who control Congress are proud opponents of humps and money managers.
How did the stock market react?
With a rally that saw the S&P 500 gain 11% in Biden’s first 100 days, this was the best performance of the various index versions since Franklin Delano Roosevelt began his first tenure in 1933. according to an NPR analysis of S&P data.
“The stock market is on fire,” says Greg Valliere, chief US policy strategist at AGF Investments. “It has amazed experienced observers and it may still have some work to do.”
What does the rally explain?
For many experts, it boils down to the US economy.
President Biden’s administration oversaw the swift adoption of vaccines and passed a $ 1.9 trillion stimulus plan that put more money into households and businesses, even after Congress passed $ trillion in stimulus programs.
These two developments have resulted in Americans reopening their wallets and reopening businesses, which is boosting the US economy.
Data on Thursday showed that Economy grew at an annual rate of 6.4% in the first quarter, while companies like Apple and Tesla recently posted blowout profits.
Meanwhile, the Federal Reserve has pledged to keep interest rates low for the foreseeable future, and the central bank continues to buy billions of dollars in bonds, which is a strong signal to investors.
“These past hundred days have never been better,” said Ryan Detrick, chief market strategist at LPL Financial. “There’s fiscal policy, there’s monetary policy, but the truth is, it comes down to the economy, and we’ve opened up, and that’s a big reason why stocks do so well.”
All of this has helped offset some of the President’s proposals that are less popular on Wall Street.
In his speech at a joint meeting On WednesdayBiden revealed a bold vision of great government that will require billions of dollars in spending. He intends to pay for this by increasing taxes on corporations and millionaires, including the rate that high net worth investors pay on profits from the sale of assets like stocks, as well as by filling in gaps.
“It’s time for business in America and the richest percent of Americans to pay their fair share,” said Biden. “What I suggested is fair. It is taxable.”
The new chairman of the Securities and Exchange Commission, Gary Gensler, is a veteran regulator who previously headed the Commodity Futures Trading Commission under President Obama and is known for a tougher approach on Wall Street.
And key committees overseeing the financial world are now overseen by lawmakers like Sen. Sherrod Brown, D-Ohio and Rep. Maxine Waters, D-Calif., Who are widely viewed as being less friendly to Wall Street while others are progressive Legislators Sens. Bernie Sanders (I-Vt.) And Elizabeth Warren (D-Mass) are expected to have prominent votes.
But an economy that many experts see as heading for the best annual growth since 1984 has a way to color things, according to experts. Ultimately, investors recognize that any proposal – change tax laws or raise taxes – has yet to pass a Congress where Democrats have a slim majority.
“Unless [Biden] did something crazy, the table was set for this market, “says Jonathan Golub, Chief US Equity Strategist and Head of Quantitative Research at Credit Suisse.
“I don’t see anything that will change this in the medium term,” he adds.
There are more serious risks to Wall Street, however.
Since the pandemic began, investors and economists have stated that the virus will determine how quickly the economy recovers. And despite rising vaccination rates, there are still concerns about the variants.
There is also a prospect of rising inflation. Manufacturers are hit hard by supply shortages and leading companies like Proctor & Gamble and Kimberly-Clark are raising prices.
In the meantime, the Fed has continued to insist that any expected rise in inflation will be manageable. However, concerns remain that the central bank may need to raise interest rates to counter the effects of rising prices.
And in the end, the markets were always cyclical. Sometimes they go up and sometimes they go down. According to Golub from Credit Suisse, What causes the record run in the markets to stop may be as simple as time.
“You know, trees don’t grow to heaven,” he says. “As soon as we are through the second and third quarters of this year, things will gradually return to normal.”