Veteran investor Mark Mobius warns US stock market faces steep decline due to Joe Biden plans to raise taxes
Disclaimer: Fund Manager Mark Mobius Says US Stock Exchange Faces Big Drop
Veteran investor Mark Mobius has warned that the U.S. stock market is facing a steep decline due to President-elect Joe Biden’s plans to raise taxes.
Mobius, one of the world’s best-known investors, said taxes could rise “ drastically ” under Biden for individuals and businesses.
“If he’s able to get these tax changes through Congress, it wouldn’t be good for the US stock market, and you’ll likely see a correction,” Mobius said.
The US market has had a tumultuous year. The S & P500 index of America’s largest companies started the year at 3,258, before slumping to 2,237 in late March as Covid-19 approached the West.
The index – which is led by tech giants such as Apple, Microsoft, Amazon and Facebook – has since climbed to 3,558 even as the virus spread in the United States.
The S & P500 and the Dow Jones hit record highs last week following the announcement of Covid-19 vaccines. The S&P is up more than 10 percent this year. But a “correction” of the type described by Mobius could see the index fall by more than 10 percent.
Biden’s plans released ahead of the election include raising taxes on people with incomes over $ 400,000 and raising the corporate tax rate.
The plan would raise $ 3.3 trillion over the next decade, according to think tank Tax Foundation.
“If you see an American economy moving more towards a socialist structure, then the outlook is not very good,” Mobius said.
“ For all the things that people hate Trump for, one of the things he has done has been to stimulate the U.S. economy in a number of ways – by lowering the rules and regulations for businesses and lowering taxes. ”
Mobius was hired in 1987 by Sir John Templeton, an investor who died in 2008, to launch one of the first funds focused on emerging markets equities.
A German national, he became known as Mr Emerging Markets and the pioneer stayed with the American fund group Franklin Templeton until 2018, when he founded the Mobius Capital Partners fund company.
President-elect: Biden’s plans include raising taxes on people with incomes over $ 400,000
He said the weaker US dollar meant emerging economies “looked pretty good” after a difficult crisis over the past decade.
The MSCI Emerging Markets Index rose 18% last year – far less than the S & P500’s 29% rise.
Mobius, 84, who has invested in emerging markets for more than four decades, said some emerging economies looked more like a “ safe haven ” to hide money than the West.
He said: “China is out of this Covid problem. If you look at Taiwan, they handled it very well, Korea handled it very well, a number of countries have done a good job dealing with the crisis and are moving forward.
“So in that sense, if you’re looking for a place to put your money where you want to see growth, then these are the places you want to be, it’s kind of a safe haven.
Mobius also believes that the strained relationship between the United States and China will melt under Biden.
Relations between the world’s two largest economies deteriorated under Trump as they wrangled over trade tariffs and technology.
“ I would say the winners of this election were China and Iran, because Biden will be wearing a soft glove with China … Trump’s rhetoric will be missing, and that means a lot, ” Mobius said.
“And that will kind of be a step in the right direction.