While markets have not reacted negatively to hints from Janet Yellen about hiking taxes, Gareth Soloway, chief market strategist of InTheMoneyStocks.com, said that investors are still waiting to see how much taxes will be raised.
“I think the markets are waiting for clarity on it. The question is, is the corporate tax rate going to go to 25%, or 28%,” Soloway said. “I’m also curious to hear what the long-term capital gains tax could be raised to. I think if we get a raise in the long-term cap gains let’s say starting in 2022, you could see major selling and profit taking into this year as well.”
Ultimately, the government will have no choice but to raise taxes and allow interest rates to run higher, Soloway said.
“I think it’s inevitable. The printing of money has got us in a situation where not only do you have to raise taxes to pay for this printing of money but you also create the inflation scenario where that interest rate is going to driven up because of it,” he said.