Biden’s tax reforms: further fuel for the rotation trade?

If enacted, President Joe Biden’s corporate tax reforms could become a significant drag on US equities and hit the earnings of technology, pharmaceuticals and biotech companies particularly hard. However, political wrangling could mean the changes eventually made are quite different to the current proposals.
Oliver Allen Markets Economist
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Asset Allocation Update

Is US households’ cult of equity a bad omen for stocks?

The record allocation of US households (and non-profit organisations) to equites chimes with the broader evidence that the valuation of the US stock market is high by historical standards. With that in mind, while we are not forecasting a crash any time soon, we do anticipate that returns over the next decade will be substantially lower than they have been over the last one.

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Our monthly Long Run Returns Monitor provides an updated set of projections for the returns from major asset classes over the next few decades. Given that the period since the previous edition of this document has been a fairly quiet one for financial markets, our latest projections have changed only slightly. We continue to think that the returns from bonds over the next ten years or so will be meagre, those from global equities and DM REITs reasonable, but that those from commodities will be deeply negative.

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