Every trader is now talking about the possible tax hikes that are coming down the pipeline for most corporations and the American people. At this time, there are no specifics of what kind of tax increases we shall see, but it is likely that we will learn more soon. Corporate tax hikes will make the United States less competitive around the globe, so that is a major negative for the markets. Then if there is a potential large tax increase on people making over $400,000 a year, that will make many entrepreneurs and small business owners less productive. Already, the current gasoline increase at the pump is starting to hurt many individuals, so a tax hike in the paycheck will really hurt the public.
I’m not sure of the exact percentage of tax receipts that cause a recession and ultimately a bear market, but I know it is not that high. The markets are always forward looking and anticipate the coming fiscal events. Traders should recognize that the markets will start to calculate these tax increases very soon, often before they are even made public. So get ready, this is just one giant issue for the markets that is coming very soon.
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