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How will Joe Biden’s stimulus packages, with higher taxes, affect stock markets?
- Funding stimulus measures through higher corporate and personal taxes may take a toll on US equities
- While technology, communication services and health care sectors may be adversely affected, industrial, energy and materials sectors stand to gain
Reading Time:3 minutes
Why you can trust SCMP
Since becoming US president, Joe Biden has announced an eye-watering US$6 trillion in proposed fiscal spending. First was the US$1.9 trillion American Rescue Plan in January. All those US$1,400 stimulus cheques are still reverberating through the economy as consumers unleash pent-up spending power.
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In the past two months, there have been two further very large proposals: the American Jobs Plan (US$2.3 trillion), focused on rebuilding much of the country’s ageing infrastructure, and the more recent American Families Plan (US$1.8 trillion), aimed at funding childcare and education.
These are massive numbers in both absolute and relative economic terms. They come at a time when politicians and markets are more tolerant of higher levels of debt to fund spending habits.
However, the choice to fund these stimulus packages through higher corporate and personal taxes may take a toll on US equities. The difficulty lies in assessing what the final policy mix will actually look like.
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The plans announced so far are unlikely to look exactly like the policies ultimately agreed upon. Democrats generally approved of the measures in the huge American Rescue Plan that were paid for by increasing government debt.
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