Democratic control of Congress would bring new risks for stocks, but won't stop the bull market

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Why did markets hold up despite chaos at the U.S. Capitol today? The Dow and S&P 500 closed in positive territory, but volatility was the story this afternoon. Here's what to expect tomorrow.

fell 0.6% , as technology shares fell in a rotation from growth to value and cyclicals. Big tech also weakened on concerns that Democrats would impose higher taxes and more government regulation.mob supporting President Donald Trump took over both chambers of the U.S. Capito

against incumbent Republican Kelly Loeffler, according to NBC News. In the other Senate runoff election, Democrat Jon Ossoff was declared projected to win over Republican Sen. David Perdue after the stock market close. "That's the $64,000 question. It's really tough to answer until you get there. For now, people are going to focus on round numbers, and the next round number is 1.25%," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "It already had an impact on Nasdaq stocks today. High P/E stocks are not invited to the party. That's the first reaction to rising rates.

Clifton said higher taxes on wealthy individuals could go into effect this year, raising the current highest rate of 37% to the prior 39.6% rate. Capital gains and dividend tax rates could also rise from 20% to 25% or more, he said. Tobias Levkovich, chief U.S. equities strategist at Citigroup, does expect tax hikes to go into effect this year for corporations. The 4 percentage point increase in the corporate tax rate would knock $8 to $9 from an expected S&P 500 companies earnings of $169 for 2021. "We would expect any tax rate change to start this year and not be layered in over several years, though a case could be made for gradual increases given existing challenges from Covid-19," noted Levkovich.

 

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