Wall Street stock market last week to create a new trend, investors in the rejoicing, but also is on guard against two major threats: one is the U.S. stimulus measures driven by economic growth, may trigger the largest “inflationary panic” in 40 years, the second is the Washington is brewing “tax increase storm “.
The U.S. Consumer Price Index (CPI) for March will be released on the 13th, is estimated to climb 0.5% over February, the annual rate of increase is expected to reach 2.5%, in the supply chain continues to be disturbed, the authorities to implement fiscal and monetary easing measures, and consumer demand began to release the backlog, investors will be judged from the price surge trend whether to continue; March retail sales data released on the 15th is an important indicator to observe demand The March retail sales data released on the 15th is an important indicator of demand, and is expected to grow 5.5% from February.
Jefferies global equity strategist Wood said, the new crown epidemic suppressed demand is bound to explode, “the result is that investors should be prepared for the biggest inflationary panic in the United States since the early 1980s, when the Federal Reserve Board (Fed) Chairman Vorkel in the late 1970s through the continued rate increases to suppress the two-digit inflation rate “.
The market is debating how long the rising trend of inflation will be maintained, and how the Fed will respond. Fed Chairman Ball is scheduled to be interviewed by the media at 7 p.m. EST on the 11th, and will also give a talk at 12 noon EST on the 14th, and at least seven Fed officials will give speeches, the content of which is of great interest.
In addition, the Biden administration is planning to raise the U.S. corporate tax from 21% to 28% and set the lowest corporate tax rate in the world, analysts warned that these measures could hurt corporate profits and impact U.S. stocks. Analysts said that the current reaction of investors to the Biden administration’s tax hike plan is still small, because it is still waiting for the final version passed by Congress, but investors have reacted only a matter of time.
UBS estimates that if Congress passes the current version of the tax increase program, the S&P 500 component companies will see a 7.4% reduction in profits, but the actual impact of the final version may only be half, while Goldman Sachs estimates that Congress passes the current tax increase, S&P 500 companies may see a reduction in earnings per share of up to 9% next year.
Citigroup chief U.S. equity strategist Rykovich said that as long as the corporate tax rate increases by 4 percentage points (the Biden administration’s proposal is to raise 7 percentage points), the earnings per share of S&P 500 companies this year will be 3% less than analysts’ estimates.
Among them, U.S. multinational companies in telecommunications services, IT and pharmaceutical industries will be particularly hard hit, because most of their precious assets are intangible assets such as intellectual property.
According to S&P Dow Jones Indices, S&P 500 companies paid a tax rate of 17.5% in the third quarter of last year, and the tax rate for technology companies was only 14.8%.
Miretti, head of active equity investments at Wells Fargo Asset Management, said, “It’s kind of like a picnic for everybody right now, but you can see the storm coming.”
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