U.S. stocks rebounded on Friday from a day-earlier swoon as investors digested the implications of a planned capital gains tax hike, with many pointing to reasons why such a policy alone would be unlikely to threaten the rally in equities.
The S&P 500 was up more than 1% in afternoon trading, recouping losses from Thursday, when stocks fell after reports that President Joe Biden would seek to nearly double the capital gains tax to 39.6% for wealthy individuals.
That would be the highest tax rate on investment gains, mostly paid by the wealthiest Americans, since the 1920s. The rate has not exceeded 33.8% in the post-World War Two era.
But investors pointed to a broad range of reasons why the markets are likely to take the proposal in stride, including the limited effect of such proposals on equities in the past and expectations that any hike would be much lower than anticipated.