The new administration within the White House under President Joe Biden has proposed an agenda that could threaten the recovering stock market. With a $1.9 trillion stimulus relief package to support the economy and now a $3 trillion infrastructure agenda that could see the corporate and capital gains tax rise up significantly, the stock market could be on the edge of collapsing like it did at the beginning of the pandemic in March of 2020.
Biden faces tough economic challenges as jobless claims continue to rise and the unemployment rate remains high, he may be faced with the important task of preventing another major recession. With the recent stimulus package signed and new extended unemployment benefits being deployed out to citizens that are without work, there’s reason to believe that the stock market will at least grow significantly in the next quarter of 2021.
The S&P 500 recently closed at above 4,000 points for the very first time ever. This is great news for investors but does it really indicate that the economy is recovering from the pandemic? Many economic experts believe that the recent relief package is playing a significant role in the speculative trading patterns that can be seen within the stock market right now. It’s also likely contributing to some of the growth that is occurring within these stock indices.
With that being said, Biden could generate some issues for the stock market in the future by signing an infrastructure plan that raises the corporate and capital gains tax rate. It doesn’t exactly help that Biden visited Pennsylvania and called for the ‘end of shareholder capitalism’ during the 2020 campaign in the summer of last year. These comments generated speculative fears at the time and many of those fears are now being realized within the stock market.
While the forecast for the stock market in the immediate future looks to be fairly bullish, there could be significant issues ahead if the effects of the pandemic don’t improve before September when most of the extended jobless benefits run out, presumably for the final time. It’s hard to imagine that congress will pass any more stimulus checks or unemployment benefits unless a major spike in coronavirus cases takes place again before the winter season starts.
While the infrastructure plan that Joe Biden wants to sign may have some short term benefits for the economy, the long term consequences could create some serious downward pressure across multiple industries. This downward pressure will certainly not ignore the stock market and a recession could take place if these concerns are not addressed accordingly.
The Biden administration has been big on spending and they are struggling to find new ways to fund their agenda. Raising the corporate tax rate may offset a lot of the spending, but is it the right way to sustain long term growth and support new jobs in the recovering economy? Only time will tell if his economic policies pay off, but there are millions of citizens across the country that can’t afford any additional financial consequences in the near future.