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President Biden wants to raise taxes on corporations and wealthy investors. Its best regulator on the market has promised a tougher approach. And the leading Democrats who control Congress are proud opponents of tycoons and money managers.
So how did the stock market respond?
With a rally that sent the S&P 500 up 11 percent in Biden’s first 100 days, the best performance from the various versions of the index since Franklin Delano Roosevelt began his first term in 1933, according to an NPR analysis of S&P data.
“The stock market is on fire,” said Greg Valier, chief strategic strategist at AGF Investments. “There are amazed veteran observers and there may be ways to continue.”
So what does the rally explain?
For many experts, this boils down to the US economy.
President Biden’s administration has controlled the rapid release of vaccines and adopted a $ 1.9 trillion stimulus plan that has poured more money into households and businesses, even after Congress has already given trillions of dollars in incentives.
These two events caused Americans to reopen their portfolios and business to reopen, boosting the US economy.
Data on Thursday showed that the economy grew by 6.4% per year in the first quarter, while companies such as Apple and Tesla recently reported profits.
Meanwhile, the Federal Reserve is committed to keeping interest rates low for the foreseeable future, and the central bank continues to buy billions of dollars worth of bonds, providing a strong signal to investors.
“The last hundred days have been almost as good as we’ve ever seen,” said Ryan Detrick, chief market strategist at LPL Financial. “There’s fiscal policy, monetary policy, but the truth is that it all comes down to the economy and we’ve opened up and that’s a big reason stocks are doing so well.”
All of this has helped offset some of the president’s proposals, which are less popular on Wall Street.
In a joint speech Wednesday, Biden revealed a bold vision for a large government that would require trillions of dollars in spending. He intends to pay for this by raising taxes on corporations and millionaires, including the percentage that wealthy investors pay on profits from the sale of assets such as shares, as well as by closing loopholes.
“It’s time for corporate America and the richest 1% of Americans to pay their fair share,” Biden said. “What I have proposed is fair. It is financially responsible.”
Meanwhile, the new chairman of the Securities and Exchange Commission, Gary Gensler, is an experienced regulator who previously headed President Obama’s Commodity Futures Trading Commission and is known for his tougher approach to Wall Street.
And key committees that monitor the financial world are now overseen by lawmakers such as Senator Sherod Brown, Ohio and Representative Maxine Waters, California, who are widely seen as less friendly to Wall Street, while other progressive lawmakers like Sens. Bernie Sanders, I-Vt., And Elizabeth Warren, D-Mass, are expected to have prominent voices.
But an economy that many experts say is focused on its best annual growth since 1984 has a way of coloring things, experts say. Ultimately, investors realize that a proposal – to change the tax code or raise taxes – has yet to be passed by Congress, where Democrats have only a small majority.
“Unless [Biden] did something abnormal, the table was set for this market, “said Jonathan Golub, a major strategic shareholder in the United States and head of quantitative research at Credit Suisse.
“I don’t see anything that can change that in the interim,” he added.
But there are more serious risks to Wall Street.
Since the beginning of the pandemic, investors and economists say the virus will determine how quickly the economy recovers. And despite rising levels of vaccination, there are still concerns about options.
There is also the prospect of rising inflation. Manufacturers are hit hard by supply restrictions, leading companies such as Proctor & Gamble and Kimberly-Clark are raising prices.
The Fed, meanwhile, continues to insist that the expected rise in inflation will be manageable, but fears remain that the central bank may need to raise interest rates to counter the impact of rising prices.
After all, markets have always been cyclical. Sometimes they go up and sometimes they go down. According to Golub from Credit Suisse,, what ultimately stops breaking market records can be as simple as time.
“You know, trees don’t grow to the sky,” he says. “Once we get through the second and third quarters of this year, things will gradually slow down and return to normal.”