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Contrary to previous presidential elections, the incumbent and former Vice President Joe Biden couldn’t be more polar opposite on issues related to economy, disease control and reviving job growth in the U.S. If elected president, Biden has vowed to reverse things like the tax reform implemented by President Trump, which can bring a significant change to how investors will look to shift their investment holdings to seek tax shelter and capital security.
In this article, we’ll take a closer look at the impacts of the potential political shift and how it can transform the capital markets in the U.S.
Be sure to check out our Education section to learn more about municipal bonds.
The same tit-for-tat game is being promised, at a varying degree, by Biden’s political agenda, if he is elected. One of those things, as aforementioned, is the reversal of tax reform laws signed by president Trump in his earlier years in power. These tax laws served as an overhaul to the previous tax rules, especially for corporate taxation and tax for wealthier Americans.
Having said that, Biden, if elected president, will likely settle on a give-and-take scenario for his own tax reform bill. However, some things that will likely be eliminated are the tax cuts for wealthy individuals and increasing corporate taxes. If these things are implemented, here is how it will likely impact the fixed-income markets:
This being said, the elimination of President Trump’s tax cuts will certainly bring an influx of capital to the municipal fixed-income markets in the upcoming years, which also means that municipalities may benefit from the increased interest in the municipal debt and lower their coupon payments.
Use our Screener to find the right municipal bonds for your portfolio.
If President Trump prevails, we are not likely to see much of a change in the American tax system, and investors will likely favor equities over tax-free income.
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Disclaimer: The opinions and statements expressed in this article are for informational purposes only and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned. Opinions and statements expressed reflect only the view or judgement of the author(s) at the time of publication and are subject to change without notice. Information has been derived from sources deemed to be reliable, the reliability of which is not guaranteed. Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professionals and advisers prior to making any investment decisions.