But the outlook for economic growth and corporate profits is often a much bigger factor in the decision to buy, sell or hold on to a stock.
“Markets can grow, and grow above trend, even if you’re taking the capital gains tax rate up,” said Lori Calvasina, head of U.S.
Stocks dropped just 0.9 percent for the day and bounced back a day later.Even after Friday’s 0.7 percent decline, the market sat on a comfortable gain of more than 11 percent this year.
Investor stoicism may also reflect the fact that Mr. Biden’s plan requires congressional approval, a tall order given the slim Democratic control of both chambers.
And after the top rate rose to 28 percent, from 20 percent, at the end of 1986, the market continued to roar higher, by nearly 40 percent through most of 1987.
Stocks eventually suffered their worst single-day collapse ever on Black Monday in October 1987, but that crash had little to do with tax policy, and the markets ended the year slightly higher.
That surge is being fueled by a river of federal government spending, rock-bottom interest rates and more Covid-19 vaccinations.
Now Wall Street analysts are ratcheting those profit forecasts even higher, expecting earnings for companies in the S&P 500 to jump more than 30 percent this year.
Tax increases are “not the main event,” said Saira Malik, chief investment officer at the global equity division of Nuveen, a large asset manager.