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Rising inflation expectations aren’t likely to kill the stock rally. Here, the scene on the New York Stock Exchange floor on Wednesday. NYSE
Inflation expectations have leapt recently amid the promise of more federal pandemic stimulus and the Federal Reserve’s reiteration of easy-money policies, but the stock rally that kicked off last spring appears primed to power through such concerns.
The 10-year break-even rate or the gap between yields on Treasuries and comparable Treasury inflation-protected securities jumped to just above 2% to start 2021 from just below that level and have risen sharply since early November. Since Jan. 5, just before the Georgia Senate runoff results showed the Democrats would take control of the Senate, Treasury yields have spiked. That’s because the Democrats’ plan for more fiscal spending to support the economy may cause some inflation. Market-implied 30-year break-even inflation rates could
Anthem could benefit as the labor market recovers, says Jefferies. Dreamstime
Managed care stocks that focus on the government-funded insurance market have jumped in the week since Democrats secure control of the Senate, as investors have begun to anticipate an expansion of Obamacare, and even a public option.
Shares of Centene Corporation (CNC) are up 6.5% since the market closed on January 5, while shares of
Molina Healthcare (MOH) are up 3.6%. The
S&P 500, which is up 1.8% over the same period.
But in a note out Friday morning, Jefferies analyst David Windley argues that investors are too optimistic that the Biden administration will drive up managed care stocks in the near term by significantly expanding government-funded coverage.
Trump’s trade conflicts, deregulation, immigration restriction, tax cuts, and military buildup had little impact on the U.S. economy in either direction. But the change of leadership at the Federal Reserve was significant and could have long-lasting benefits, writes Matthew C. Klein.
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U.S. President-elect Joe Biden, shown here at an event in Wilmington, Del., on a recent day, could look to undo some of the 2017 tax cuts, including a potential increase on dividend taxes. Chip Somodevilla/Getty Images
For wealthy individuals, paying a higher tax rate on dividends could be in the offing under the incoming Biden administration, though it’s far from certain given all of the crosscurrents and political rancor in Washington.
Just what will happen in Washington regarding tax policy after President-elect Biden assumes office is hard to divine, and details of any plans for a dividend tax are scant. A spokeswoman for the Biden transition team referred Barron’s to a tax-policy paper on its website that calls for “those making more.