“Biden is planning a capital gains tax hike to as high as 43.4% for wealthy Americans”

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Bloomberg News reported Thursday afternoon that Biden is planning a capital gains tax hike to as high as 43.4% for wealthy Americans. The proposal would hike the capital gains rate to 39.6% for those earning $1 million or more, up from 20% currently, according to Bloomberg News, citing people familiar with the matter.

"Biden proposal effectively doubles the capital gains tax rate on $1mm income earners," said Jack Ablin, Cresset Capital Management's founding partner and CIO. "That's a sizable cost increase to long-term investors. Expect selling this year if investors sense the proposal has a chance of becoming law next year."

Growth stocks, which could come under selling pressure on higher capital gains taxes, led the intraday decline on Thursday with shares of Tesla and Amazon falling. The iShares S&P 500 Growth ETF fell 0.5%, more than its value counterpart.

"Markets are highly concentrated in small number of growth names," said Mark Yusko, CEO & CIO of Morgan Creek Capital Management. "Those stocks have driven most of the gains over past few years and many investors have significant gains at current prices. Fear of higher capital gains rate could motivate selling of those names and trigger market correction, so some investors will try and front run that potential move by selling or hedging through short selling."

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