Investors are on edge today as markets bracing for a massive tax hike announcement by the Biden administration.
Cryptocurrencies are hit the hardest, with bitcoin slipping below $50,000.
The administration’s leaked proposal of tax rates as high as 43.4% for the highest earners has spooked investors, especially in the crypto market, as many fear crypto investors will be hit by Biden’s tax plan.
Cryptos Lose 1/4 of a Trillion in Value – But, I Still Like Bitcoin
A simultaneous drop in most cryptocurrencies erased $260 billion off the total value of the cryptocurrency market. Bitcoin fell 4% to around $49,130, ether fell 7% to around $2,220, and Dogecoin fell 17% to $0.17.
Personally, I see Bitcoin as even more valuable in an environment of high inflation and high taxation. I’m also hoping that the sensible democrats, or democrat, in the room — I’m talking to you Senator Joe Manchin — are more pragmatic about these wild Biden tax proposals.
It seems that I’m not the only one hoping for some political leadership or, at the very least infighting and gridlock. While pretty much any free-thinking person is terrified of huge tax hikes, Goldman Sachs stated that it predicts far more modest hikes due to congressional gridlock; 28% instead of the 39.6% on capital gains of top earners.
Nonetheless, 28%, up from 20%, in my view would still be hurtful to the markets. The question now is whether the markets can continue to support such high valuations knowing that, if Biden were successful,
Investors will not want to be as heavily invested in U.S. equites,
Companies will earn less money because earnings will go to Uncle Sam (or, in this case, Uncle Joe) instead of companies. As such, how will investors justify such sky-high valuations?
Companies will scale back. This would have a devastating affect on the U.S. economy as a whole.
Renewable Energy, Solar Stocks To Benefit From Biden
Elsewhere today: I’m watching renewable energy and solar stocks. The administration’s proposal to cut carbon emissions will likely impact these sectors. The Invesco Solar ETF jumped 5%, with Enphase Energy jumping 8% and SolarEdge Technologies 10% on Thursday.
New U.S. home sales figures data is due today at 10:00 am EST. Home prices have skyrocketed as you know and there’s not enough supply to keep up with the growing demand. Lumber prices have seen a tremendous run-up, for example, which is indicative of a hot housing market.
American Express, Honeywell International, and Schlumberger NV are expected to release earnings reports today.