May 7, 2021

Twelve Month Payday Loans

The Passionate Pursuit Of Business

Get ready for $178 billion of selling ahead of the capital-gains tax hike. These are the stocks most at risk.

3 min read

Avid readers of this column may have had a sense of déjà vu on Thursday. Last month, a Need to Know column explored what would pay for President Joe Biden’s infrastructure spending — and quoted a former Biden aide, Evercore ISI analyst Sarah Bianchi, who said it would “probably include nearly doubling capital-gains taxes on those with income over $1 million.” Not that it was any state secret — the Biden campaign’s website suggested such a move too.

In any case, the stock market reacted negatively to the Bloomberg News report that the White House was considering doubling capital-gains taxes on the wealthy to help pay for social spending, as the S&P 500
SPX,
-0.08%
dropped by the most in a month. The news was particularly jarring to the highflying cryptocurrency space, with bitcoin
BTCUSD,
-1.05%
and ethereum
ETHUSD,
+0.12%
slumping.

One question now is whether the closely divided Senate will go for it. “Frankly, I suspect that these proposed tax increases will be knocked down at the hands of Senator [Joe] Manchin who remains the ‘swing’ vote in the Senate,” said Louis Navellier, the chairman of Navellier & Associates. An alternative is that the Senate could increase the capital-gains tax, but by a smaller amount — analysts at Goldman Sachs suggest they’ll settle at 28%, up from 20% currently. Another question is whether the tax will be applied retroactively or not.

Analysts at Goldman Sachs — in October — ran the numbers on the stock market impact of previous capital-gains tax hikes. While there is only a modest impact on the stock market as a whole, momentum stocks usually get socked before they are levied, they found. That makes sense — investors logically are more motivated to sell the stocks where they would save the most by avoiding higher capital-gains taxes.

The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of their equity assets, the Goldman analysts found. According to the Federal Reserve’s distributional financial account data, the top 1% held $17.79 trillion of equities and mutual funds in the fourth quarter of 2020 — so a 1% selling of stocks this time would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found that millionaires accounted for just over 500,000 filers, or about 0.4% of the total.)

Here is the list of the top price gainers in the S&P 500 and Nasdaq-100 over the last year and over the last five years.

S&P 500 and Nasdaq-100 gainers

Company

One-year % change

Company

Five-year % change

Penn National
PENN,
+0.22%
575

Enphase Energy
ENPH,
-14.14%
6160

L Brands
LB,
-0.22%
548

Etsy

2230

Caesars Entertainment
CZR,
+0.82%
527

Advanced Micro Devices
AMD,
-1.40%
1882

Tesla
TSLA,
-1.47%
392

NVIDIA
NVDA,
-0.68%
1538

Gap
GPS,
-0.41%
368

Tesla

1318

Freeport McMoran
FCX,
+1.71%
355

MercadoLibre
MELI,
+1.06%
1137

Enphase Energy

321

Paycom Software
PAYC,
+0.21%
943

Tapestry
TPR,
+0.27%
237

Atlassian Corp.
TEAM,
-0.07%
859

Etsy
ETSY,
+1.86%
235

Align Technology
ALGN,
-1.35%
733

Generac Holdings
GNRC,
-4.70%
233

Generac Holdings

720

Moderna
MRNA,
-2.58%
228

Micron Technology
MU,
-3.83%
695

Peloton Interactive
PTON,
+0.86%
226

Lam Research
LRCX,
-1.06%
662

Align Technology
ALGN,
-1.35%
224

ServiceNow
NOW,
-0.96%
650

News Corp
NWSA,
-1.43%
219

Zebra Technologies
ZBRA,
-1.03%
647

SVB Financial
SIVB,
-0.71%
210

Caesars Entertainment

645

Data: FactSet (News Corp owns MarketWatch, the publisher of this report.)

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