Higher Capital Gains Taxes | Daily Market Update

Friday, April 22, 2021

Top Story

Let’s talk about higher capital gains taxes

  • Stocks sold off after a report that the White House was considering doubling the capital gains tax on the wealthy to 39.6%.
  • Although stocks were surprised, this was exactly what President Biden ran on, so it shouldn’t be a shock to anyone.
  • When will it start? If it starts next year, some could sell ahead of the higher taxes, but it could also be retroactive.
  • Higher capital gains aren’t necessarily bad for stocks. For example, the last hike was in 2013 and the S&P 500 Index gained nearly 30% that year.

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Daily Insights

U.S. stocks open little changed after selling off on Thursday following the proposal of an increased capital gains tax

  • European markets are modestly lower in midday trading amid a batch of mixed earnings.
  • Asian markets finished mostly higher overnight with Japan the exception.

Leading indicators rebound in March

  • The Conference Board’s Leading Economic Index (LEI) rose 1.3% month over month in March, ahead of Bloomberg consensus forecasts of 1%.
  • The February LEI was revised lower to -0.1%, snapping what was a 10-month growth streak for the index.
  • Falling jobless claims were the largest contributor to the index in March, as rising vaccinations have helped states move forward with reopening plans.
  • We take a closer look at the leading indicators and the drivers of economic momentum in today’s LPL Research blog, available at 12p.m ET.

Technical update

Wednesday’s rally was quickly erased by a 0.9% loss for all three major U.S. large cap indexes. Despite the poor overall returns, internal selling pressure was more muted, with decliners outnumbering advancers by less than 2:1 on the New York Stock Exchange (NYSE). Markets are little changed in early trading, but we still see first support for the S&P 500 near 4000.

COVID-19 news. The United States reported 61,000 new COVID-19 cases on Thursday, largely in-line with the range seen over the past couple weeks (source: New York Times).

  • Cases are now falling in Michigan, the state that has the highest number of new cases per million per day.
  • Peak cases in Western Europe may have already passed, as vaccination rates are rising and the recently imposed restrictions have taken effect.
  • Nearly 27% of the total U.S. population is fully vaccinated, with roughly 41% receiving at least one dose of the vaccine.

LPL Research in the Media

LPL Financial Chief Market Strategist Ryan Detrick joined Bloomberg Radio with Carol Massar recently to discuss current market trends. You can listen to the full interview here.

Peak Optimism?

While optimism surrounding the reopening is certainly understandable, LPL Research takes a look to see if sentiment is flashing a near-term contrarian warning sign for stocks. Learn more in this week’s Weekly Market Commentary.

Some Pros and Cons

On the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick discusses some potential worries, why any weakness could be a buy the dip opportunity, and Sustainable Investing this Earth Day.



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