BackMark Mobius says Biden bad for US equities, good for others
A contested outcome will also add 'more uncertainty' to the U.S. equity outlook, Mobius said.
PremiumA Joe Biden presidency will be negative for equities in the U.S. and positive for other markets given his plans to hike taxes on companies and wealthy Americans, according to veteran investor Mark Mobius.
Biden’s tax increases will reduce the incentive for people to invest in the U.S. market, said Mobius, who set up Mobius Capital Partners after three decades at Franklin Templeton Investments. That will “be good for emerging markets and other global equities since there will be a retreat from the U.S. market," he said in an emailed interview on Friday.
Mobius’s comments on Biden come as the Democrat inches closer to unseating President Donald Trump in the White House, and this week’s global equity rebound shows signs of stalling. The MSCI All Country World Index was little changed on Friday, after advancing in each of the previous four days. That rally has pushed the gauge close to levels where it has faced resistance twice since August.
“The so-called wealth effect will be at play" in the U.S., Mobius said. “If the people who invest in the stock market expect that their wealth will be hit with higher taxes, they will restrain from investing."
His views are in contrast to some global investors who have said that Biden will not be able to raise taxes easily with a potentially split Congress. The S&P 500 Index is up more than 7% this week, set for the best weekly gain since April. The Nasdaq 100 gauge has surged even more, reflecting expectations of the removal of potentially higher capital gains taxes.
Meanwhile, Trump has questioned the credibility of the election and his campaign has peppered the courts with legal complaints.
A contested outcome will also add “more uncertainty" to the U.S. equity outlook, Mobius said. “Biden’s program is to tax the ‘rich’ – i.e. people earning more than, say, $200,000 a year. These are precisely the people who would be most active in the stock market."
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