How a Joe Biden Victory Could Sink Stocks, Boost Gold
It’s hard to tell from media coverage and polls who will win the Presidential election in November. Each camp tries to play up positive coverage and claim that it has the advantage. And while the election is still nearly two months away, more and more investors are getting nervous about the election results and the effects it could have on their finances.
We all remember the dire predictions that came from some quarters in 2016, that a Trump victory would mean disaster for stock markets. In fact, the opposite was true, as stock markets nearly doubled from their 2016 lows.
The Dow Jones Industrial Average, for instance, climbed from under 16,000 points in February 2016 to over 29,000 points early in 2020. And the S&P 500 went from around 1,800 points in February 2016 to an all-time high of over 3,500 points last month.
Both Wall Street and Main Street investors have loved what President Trump and his policies have done for their trading. Whether it’s great corporate profits, lower taxes, or fat 401(k) balances, millions of Americans know that they’re better off now than they would have been under Hillary Clinton. And that’s why they’re starting to worry about the possibility of a Joe Biden victory in November.
Paying for the Biden Agenda
Reading through the Biden campaign’s platform, there’s no denying that it’s ambitious. The amount of free stuff it promises, from college tuition to healthcare to child care, is mind-boggling. And the amount of money it would take to pay for all those services would be mind-boggling too, likely in the trillions or tens of trillions of dollars.
Much of those parts of the Biden campaign’s platform are taken from Bernie Sanders’ platform, in an attempt to woo Sanders supporters who otherwise would turn up their noses at the Establishment, and some would say boring, Biden. And in borrowing those policy proposals, Biden also borrowed Bernie’s method of paying for them.
One of the primary methods of paying for these proposals is by levying a financial transactions tax on stock and bond purchases. This means that every time you buy or sell a stock or bond, you could be liable to pay a tax. The tax rates aren’t chump change either, with tax rates of potentially half a percent or more for each trade. That dwarfs many current trading and management fees, and eats into your potential earnings significantly.
Perhaps more importantly, a taxation rate that high could put a significant damper on stock trading. It would certainly end high frequency trading, but it could end up depressing stock markets far more than intended.
Sinking Stock Markets
Another possible Biden move that could sink stock markets is a potential ban on stock buybacks. We all know that debt-fueled stock buybacks have been one of the major reasons for the surge in stock markets in recent years. But the decision to buy back stocks is one that should rightfully be made by corporations, not by the federal government.
If the federal government were to implement a ban on stock buybacks, or enact a tax on buybacks, it wouldn’t just harm corporate insiders, it would harm average investors who benefit from growing stock prices. In the event of a Biden victory, expect stock buybacks to be on the chopping block.
The reality of the stock market today is that, as much as we would like to believe that stock prices are the result of increasing production and competitiveness of American businesses, it’s largely the result of excessive money creation by the Federal Reserve and gimmickry on the part of corporate executives. But despite all of this, it has resulted in trillions of dollars of financial gains for millions of American households. Taking all this away in one fell swoop in an attempt to harm corporate insiders could be catastrophic for the retirement savings of millions of Americans who have benefited from the stock market bull run.
Reparations and Wild Cards
Finally, there are a whole host of wild cards that could wreak havoc on Americans’ savings and investments if Biden wins the election. With BLM protests rocking the nation, the idea of a Biden/Harris administration pushing for reparations for the descendants of slaves isn’t outside the realm of possibility. Expect the bill for that to run into the trillions of dollars.
Biden has also embraced a Green New Deal, an energy policy which would cost tens of trillions of dollars over the years. And with COVID-19 still likely to be around next January, a Biden administration could push for trillions more in stimulus spending, healthcare spending, or direct payments to taxpayers. With the Federal Reserve having shown its willingness to cover for the federal government’s deficit spending by monetizing new debt, there’s no telling how much money Biden might spend.
How to Protect Yourself
Because there’s a high likelihood that Biden might win the election, many investors are making moves today to protect themselves and their assets against that likelihood. They know that a Biden win would mean higher taxes, and that their retirement savings could be targeted. And that’s why they’re moving money out of 401(k) accounts or other retirement accounts and moving them into gold.
Moving retirement assets into gold can help protect your wealth against the possibility of a higher-tax regime in the future, as well as protect your assets against the likelihood of a stock market crash. And with a rollover from a 401(k) to a gold IRA, you can invest in gold without having to expose yourself to any additional tax liabilities.
A gold IRA is just like any other IRA, with the same tax treatment, except that instead of investing in stocks and bonds, it invests in physical gold coins and bars. Just imagine the wealth protection you gain from owning physical gold, while still enjoying the tax treatment of a 401(k) or IRA retirement account.
If you’re worried about the consequences of a Biden victory in November, or the possibility of a stock market crash, shouldn’t you start thinking about investing in gold? Contact the experts at Goldco today to learn how you can protect your investment portfolio with gold.