History says Biden's planned capital-gains tax will put immediate selling pressure on stocks, according to Goldman Sachs
- Joe Biden's planned capital-gains tax may put immediate selling pressure on stocks, according to
- In a Friday note the firm explained that the last capital-gains tax hike in 2013 sparked a stock sell-off worth roughly $100 billion from wealthy individuals.
- However, those individuals who sold quickly bought back stocks only a few months later, leading Goldman to conclude that the household selling around tax hikes will be "short-lived and fully offset in the subsequent quarters."
Biden's planned capital-gains tax hike may put immediate selling pressure on stocks given what's happened in
A team of Goldman analysts led by Arjun Menon wrote on Friday that
While this selling may be a downside risk to stock allocations in 2020, Goldman said it will not result in a long-term sell-off or slowing economic growth.In the months following the 2013 rate hike, the top 1% bought back more stocks than they had sold prior to the change, said Goldman. Their reduction in stock exposure was only temporary, and Goldman said it believes that same pattern is likely to occur again.
"We expect household selling around capital-gains tax rate changes should be short-lived and fully offset in the subsequent quarters," Goldman wrote.In fact, Goldman forecasted that the wealthiest 1% of Americans will be the largest drivers of total stock demand in 2021, even with a "blue wave" election outcome. Read more: An ex-Wall Street chief strategist lambasts 3 'nonsensical narratives' he says are pushing stocks to dangerous heights — and warns that the current rally is unsustainable
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