How a Potential Joe Biden Win and Democratic Congress Could Affect Stock Market Returns

Overview

Explore the potential impact of Joe Biden winning the election and Democrats controlling Congress on stock market returns. Analyze historical data and policy proposals that could influence stock market performance, regardless of the political outcome.

Policy Proposals

• Share Buyback Tax: President Biden's proposal to quadruple the share buyback tax to 4% may impact earnings multiples and stock valuations.
• Corporate Tax Rate: Increasing the corporate tax rate could reduce companies' disposable income and discourage share buybacks.

Economic Headwinds

• Historically High Valuations: The S&P 500's Shiller P/E ratio is significantly above its historic norm, raising concerns about a potential market correction.
• Decline in M2 Money Supply: The historic decline in the U.S. M2 money supply could signal economic challenges ahead, as seen in previous depressions.

Conclusion

While historical data suggests that stocks tend to deliver for patient investors in the long run, policy proposals and economic headwinds could pose challenges for the stock market if Democrats control Congress and the White House.