A survey conducted by a leading financial publication found that two-thirds of top investors surveyed believe that the stock market will fair “worse” under Democrat Joe Biden than it did under Republican President Donald Trump.
CNBC’s survey, conducted earlier this month, polled more than “100 chief investment officers, portfolio managers and CNBC contributors who manage money about where they stood on the upcoming year for stocks under a new administration.”
Two-thirds of those polled said that they believe that the stock market will be worse during Biden’s four-year term than it was under Trump’s four-year term.
Since Trump’s inauguration in January 2017, the S&P 500 has rallied more than 60% thanks in part to the president’s landmark corporate tax cut that led to a surge in profits and a record in share buybacks. The Trump administration has also relaxed many regulations over the last four years, creating a market-friendly environment for oil and other industries.
Many investors worry that a reversal of the tax cut, which Biden has pledged, could take a big bite out of earnings at a time when market valuations are sitting at multiyear highs. Biden’s tax plan calls for raising capital gains rates for high earners.
Two-thirds of respondents said that they believe that the Dow Jones Industrial Average (DJIA) will hit new highs next year. Nearly 30 percent of respondents said that they expect the blue-chip benchmark to either stagnate or dip down to as low as 25,000 points from where it currently sits at just above 30,000 points. The DJIA was closing in on 30,000 points in February when the coronavirus pandemic, which originated in communist China, struck the U.S., sending the stock market and the economy in a hard downward spiral. At its lowest point, the DJIA dipped below 18,600 points in late March and has since been on a steady upward trajectory.
“The pandemic crisis created the biggest divot in the economy that we’ve ever had in the postwar era,” Jim Paulsen, chief market strategist at the Leuthold Group, told CNBC last month. “The output gap – the difference between where actual GDP is from what it potentially could be if you had full employed all the resources at normal productivity – it fell to almost 11% at its largest. It has now improved a little bit as the third-quarter growth rate improved, but it’s still at about 8% which is larger than almost any time in postwar history.”
The United Nations Conference on Trade and Development (UNCTAD) said that the global economy will have contracted by “a staggering 4.3% in 2020” and warned that the impact of that contraction “could send an additional 130 million people into extreme poverty.”
President Donald Trump has sought to help Americans by pushing for $2,000 coronavirus stimulus checks as part of a recent stimulus package. The effort fell short after he was forced to sign a stimulus package that offered $600 stimulus checks.