Will a Capital Gains Tax Take the Markets Down?


Next week, in a speech to Congress, Biden is likely to detail the tax plan he outlined during his campaign. Reports suggest that the capital-gains tax rate on people earning more than $1 million a year would increase from 20% to 39.6%. That would be the highest tax rate on investment gains since the 1920s, with the expected tax increases going to pay for proposed education and antipoverty programs.

At first glance, higher tax rates for capital gains may appear a bad thing for stocks. However, historical precedence doesn't bear this out, as the past two tax increases, in 1987 and 2013, were followed by a strong market for the following 6 months.


Similarly, the economy was healthy both those years, with an accommodating Federal Reserve as well as fiscal stimulus giving an edge to current economic conditions. Should we get a tax rate increase this year, analysts expect some selling towards the end of 2021, but overall, it's anticipated that the markets – which have already been forewarned of a tax hike – will be able to digest the news.

That's great news for subscribers of my MEM Edge Report, as, this weekend, I'll be revealing a stealth rotation that's taking place in the markets and the best stocks to take advantage of it.

If you'd like to receive this report on Sunday, take a 4-week trial of my MEM Edge Report for a nominal fee. Three of the top 10 Dow stocks as well as 3 of the top Nasdaq performers from today are on this report's Suggested Holdings List. Use this link here to view an example report!


Mary Ellen McGonagle

MEM Investment Research

Mary Ellen McGonagle
About the author: is a professional investing consultant and the president of MEM Investment Research. After eight years of working on Wall Street, Ms. McGonagle left to become a skilled stock analyst, working with William O’Neill in identifying healthy stocks with potential to take off. She has worked with clients that span the globe, including big names like Fidelity Asset Management, Morgan Stanley, Merrill Lynch and Oppenheimer. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus