The Major Markets ended mixed but mostly lower. Only Emerging Markets managed to end higher. However, all five indices closed less than half a percent higher or lower than the prior week.
For the S&P 500, the week was marked by back-and-forth trading as each day seemed to offset the prior day’s trading. Investors seemed largely unswayed by fresh all-time highs, overall earnings results, economic reports, or policy news.
1st Quarter Earnings results began to be released in earnest last week as 383 companies posted earnings. This week, another 901 companies will release their results with the week of May 3rd being the largest number of reports for the quarter.
On Thursday, the market did seem to take a pause upon the release of the Biden tax plan. As Reuters noted, the Biden Administration reportedly will be soon detailing a plan to increase the top marginal income tax rate from 37% to 39.6%. Furthermore, taxes on capital gains would also be increased to the 39.6% level, nearly doubling the current 20% rate for those making more than $1 million annually.
Moreover, the existing 3.8% capital gains tax as part of the Affordable Care Act would also be applied at this top level, creating a potential Federal Capital Gains Tax of 43.4%. This would be the highest rate since the 1920s, which hasn’t exceeded 33.8% in the last 100 years. This figure also does not account for any state or local taxes.
It’s important to note that these potential tax rates are still speculative. Nothing has yet to be formally rolled out by the Biden Administration, let alone voted on by Congress.
Much like the equity market, Treasury yields remained virtually unchanged for the week. The Bloomberg Barclays Aggregate Bond index managed to add 13 basis points to recoup some of its earlier losses. The Bond index closed the week with a year-to-date loss of just under 2.5%.