- Joe Biden’s planned capital gains tax could put immediate pressure on stock sales, according to Goldman Sachs.
- In a note on Friday, the company explained that the latest capital gains tax increase in 2013 caused a sale of shares worth about $ 100 billion by rich people.
- However, those who sold quickly bought back shares just a few months later, prompting Goldman to conclude that the household selling around the tax increase would be “short-lived and fully offset in the coming quarters.”
The planned increase in Biden’s capital gains tax could put immediate pressure on stock sales, given what has happened in the markets following previous interest rate hikes, according to Goldman Sachs.
A team of Goldman analysts led by Arjun Menon wrote on Friday that Joe Biden’s proposed changes to the corporate tax code would be complemented by an increase in the tax rate applied to capital gains and dividends for top-income earners.
History shows that an increase in the capital gains tax causes a sale of shares. Since the last capital gains tax increase in 2013, the richest 1% of households have sold 1% of their initial capital and mutual fund assets worth about $ 100 billion today, in the three months preceding the increase in interest rates, according to Goldman. By 2020, the richest 1% of Americans own 53% of all household supplies. Their collective action can move markets.
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Although this sale could be a negative risk for the distribution of shares in 2020, Goldman said it would not lead to long-term sell-offs or slow economic growth.
In the months following the 2013 rate hike, the top 1% bought back more shares than they sold before the change, Goldman said. The reduction in their exposure to equities is only temporary, and Goldman said he believes the same pattern is likely to be repeated.
“We expect household sales around changes in the capital gains tax rate to be short-lived and fully offset in the coming quarters,” Goldman wrote.
In fact, Goldman predicts that the richest 1% of Americans will be the biggest drivers of overall stock demand in 2021, even with the “blue wave” election results.
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