Personal Wealth Management / Expert Commentary
Ken Fisher Explores What President Biden’s Potential Tax Hikes Might Mean for Stocks
In this video, Fisher Investments’ founder and Co-Chief Investment Officer Ken Fisher addresses a very top-of-mind question for investors: What does it mean for stocks if the Biden administration is able to pass sweeping tax changes via reconciliation?
Title screen appears, “Ken Fisher: how will President Biden’s Tax Hikes Impact Stocks.”
A man appears on the screen Wearing A navy suit, sitting in his office.
He begins to speak.
A banner identifies him as Ken Fisher, Executive Chairman and Co-Chief Investment Officer, Fisher Investments.
Ken Fisher: And I'd like to speak to you for a few minutes about a very, very common fear that I'm asked about often, which is if the current administration is able to put through big tax hikes, perhaps through reconciliation with just 50 votes and swing vote of the vice president in the Senate and then also in the House, where they actually need all of the Democrats except for two, to pass anything at this moment. As I speak, 218 to 212 as I speak with six vacancies.
Ken Fisher: The feature that's I think important for you to think through is one that people never do. And I'm going to play this for you two ways. First, we have a very, very, very long history of tax hikes and tax cuts of every important type at the federal level-- personal income, capital gains, corporate. We have a very long history. And throughout the course of that history, we have continuous stock prices.
Ken Fisher: So, whenever I see something like that, where we have a continuous history and continuous stock prices, let's go back and look at the times where these things have happened before and look at the period 6, 12, 18, 24 months afterwards, and see what happened to stock prices. And this is the part that people that have this fear don't really do. And if they did, I think they'd feel better about it because the aftermath of those tax hikes is fairly consistently positive. Not perfectly so, but actually more so, believe it or not, than the average positiveness of the stock market. By about 20%, I don't mean 20% extra return, I mean about 20% of the time more positive.
Ken Fisher: And why, when the stock market is normally about two thirds positive, about two thirds of the time. Why? And this is the part that people are baffled by, because before that tax hike is ever done, it has been debated, it has been discussed, it has been praised, and it has been cussed. And it is something that has been what stock markets and capital markets always do pre-price. If there's things to be feared, they were feared into things. The length of the process to go in public through legislation, wandering around and debating and praising degrading, all of that gets pre-priced into the market before the tax ever happens and therefore is keeping the market down a little before the bill. When the bill happens, it's over and done.
Ken Fisher: And so, the history of the aftermath has been stronger because the debating process has been a little bit like a depressing spring that has been released. When you move to the certainty of the aftermath, I want to reiterate I understand why people who fear tax hikes fear them. I understand that aside from capital markets completely, it's entirely valid that this tax hike could hurt you. That tax hike could hurt your brother. The other tax hike could hurt your sister. In the real world, in the business that they do in their pocketbook, et cetera, etc....
Ken Fisher: But in capital markets, stock markets, bond markets, currency markets, etc.., all of these things in that long process it takes to get legislation through Congress, get pre-priced, creating a dampening spring effect before the legislation is passed and signed, and then a release of that spring after it's over and done. Thank you very much for listening to this video, but this is a topic that you should not see as a negative impact, because we have a long history.
Ken Fisher: We know exactly what happens, whether it's personal income, capital gains, which is basically a different version of the same thing, corporate tax hikes. You can't name a tax hike that we haven't really seen something pretty similar to before that might possibly get through this Congress and come back to negatively hurt you or someone else or help you or someone else in any way you envision it, that markets won't pre-price.
Ken Fisher: Thank you very much.
Ken Fisher finished talking, and a white screen appears with a title “Fisher investments” underneath it is the red YouTube subscribe Button.
Other Male Voice: Subscribe to the Fisher Investments YouTube channel. If you like what you've seen, click the bell to be notified as soon as we publish videos.
A Series of disclosures appears on screen: “Investing is Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of fisher investment or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.
See Our Investment Guides
The world of investing can seem like a giant maze. Fisher Investments has developed several informational and educational guides tackling a variety of investing topics.