Biden Tax Plan

We hope that everyone has enjoyed the Martin Luther King Jr. holiday. Even though the market is closed today, we wanted to send you this video to keep you informed. We also want to thank you for all the client questions that we received last year and are continuing to receive this year. One question that we would like to address is, what surprise to the market could cause unexpected volatility? The answer is that any significant tax hike in the middle of a pandemic will be one situation that could cause extra volatility. The current tax rates on the chart shown in the video are in red and the proposed tax hikes in blue represent President Biden’s proposal. The market is expecting most of these tax hikes to be pushed to 2022. So, any tax hike this year could cause volatility. Even though most of the tax increases are expected next year, it is important to know that the market is forward-looking meaning some of the volatility around tax hikes will likely be pulled forward into this year. The chart shown in the video shows the increase in corporate taxes that can put pressure on stock prices in corporate profits. Also, the proposed tax changes to individuals were also shown with the possibility of higher capital gains and dividend taxes. There have been times throughout history where the market has underperformed in years where capital gain taxes have increased. It is something we’re watching carefully but it’s likely that there will be continued discussion around the specifics and timing of tax increases.

Too Much of a Good Thing

The huge growth of online sales has been deflationary. It has helped the consumer because it has caused prices to go down. It is a little more efficient to shop online than having to go to a store. That has been pushing prices down which helps the consumer. However, we may be hitting a point where it is too much of a good thing. Online sales are continuing to grow at 25 plus percent. All those online shopping orders must be shipped some way. As a result, we are seeing the demand and price of trucking start to increase, year-over-year. We are above the pre-pandemic level for trucking demand and pricing. It’s turning into increased demand for oil. We may see the first quarter of 2021 be the first quarter where we see higher oil prices year-over-year for the first time since 2018. Oil prices dropping has helped the consumer in a deflationary way along with a good boost from online shopping being more cost-effective. These two things may be conflicting, and we may start to see prices go up early in 2021 because of the increased demand for trucking, the increased cost of trucking, and the increased demand for oil as we see prices rise which may start to hit the consumer in a negative way. Is it too much of a good thing at this point? We are watching closely for potentially high oil prices this year, the possibility of higher interest rates, and potentially a higher tax.

Technical Analysis

As we follow the S&P 500 Index and the 11 sectors that make up the S&P 500, it is also important to know that there are sub-sectors that we watch. These sub-sectors are made up of different industries. When we track these industries and track the trends inside of these industries, this gives us a better indication of pinning down a certain resistance or support level. I think that is important to keep in mind, along with the fundamentals that we use. One example of a sub-sector is Biotech. I just wanted to give a little bit more context to what we are looking at when we look at trends within the sub-sectors. There’s a lot to analyze coming up with the changes to administration these next couple of weeks.

 

 

Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here

Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here

Adam Vansant, AIF®
Associate Vice President
Wealth Consultant
Email Adam Vansant here

 

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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