Leave the politics out of this discussion, we're just talking about the impact on markets.
The narrative yesterday was that stocks fell on fears of substantially higher capital gains tax on incomes over $1M annually. Certainly, that makes stocks a less attractive investment for high income investors because it hurts their risk/return profile. But, if they're selling stocks to move assets elsewhere, that creates an opportunity for the rest of us, right?
After all, the expected future free cash flows of the underlying businesses haven't changed, right? So if valuations are unchanged, but prices are lower, that is a buying opportunity. Perhaps one could argue that the lower investment incentive (for high earners) could hurt the economy as a whole? And thus that mechanism is weighing on stocks and actually hurting business valuations? That's a little different narrative than the one we're hearing right now though.
I realize a 1% drop is pretty trivial, but if the Biden plan moves forward and looks like it will pass (or does pass), we could see more price movement on the same fears. My theoretical question is, will that present a buying opportunity for everyone who WON'T be subject to the higher capital gains rate?
Submitted April 23, 2021 at 09:52AM by Dubs13151 https://ift.tt/2QV5cJx
