- Investors fear that Joe Biden will win the November presidential elections.
- Joe Biden has pledged to implement higher corporate taxes.
- Trump has mishandled the coronavirus crisis.
Democratic Presidential candidate Joe Biden is leading US President Donald Trump in the most recent polls undertaken by Siena College and the New York Times. They show him leading by 14 points. The scenario is a bit worrying for Wall Street. Investors are wary that Biden will unleash a wave of negative policies that will stymie American companies.
While Trump has enacted laws that have reduced taxes, thereby leading to more capital for reinvestment, investors are bracing for higher taxes if Joe Biden takes over office. Biden has already said that he will raise cooperate tax by up to 28 percent. This is not exactly good news for investors. Such a move will undoubtedly impact expansion and dividends.
Many businesses and major companies are already reeling from the economic effects of the coronavirus scourge, and more taxes is the last thing that they want. The stock market has underperformed in recent days, and there are plausible presumptions that the situation has been exacerbated by the recent polls which show Biden leading.
Earlier this month, the S&P 500 jumped for a brief moment, reaching the highest level since February. Investor sentiment has, however, slumped, causing the index to slide by 5 percent.
Jim Cramer spoke about the scenario on CNBC’s Halftime Report on Wednesday, stating, “this to me is a Biden move. When I see across the board selling today, that’s Biden . . . he sounds like another president that you get that is not favorable to capital. If that’s the case, I want to have a little cash.”
The president has particularly mishandled the coronavirus epidemic. During the Tulsa rally last week, he revealed that he had directed health officials to slow down the testing because more tests meant more recorded coronavirus cases.
He has also failed to address the racism issues that continue to plague the country. He has instead continued to fan the flames by using divisive rhetoric, sometimes threatening protestors.
According to Senate Majority Whip John Thune (R-SD), “he’s good with the base. But all of the people who are going to decide in November are the people in the middle, and I think they want the President at a time like this . . . to strike a more empathetic tone.”
Goldman Sachs has already warned that its 2021 earnings forecast per share could subside from $170 to $150. Morgan Stanley has also commented on the probable outcome if Biden wins the presidency.
“We believe most investors think the equity market would price in the degradation in corporate confidence from a Democratic controlled government first and would view any pickup in aggregate demand as something to be proven, while a Republican sweep would be viewed as more likely to continue on current tax policy and deficit spending trends.”