Investing.com — BCA Research said it remains bullish on equities, but that anyone looking for a reason to turn bearish should watch for coming tax increases, more so than the surge in bond yields. <\/p>\n
Before you buy NVIDIA: our AI model’s stock picks are beating the market by 120%+. See the list now \u00bb<\/a> <\/p>\n In its GeoMacro report, BCA’s top strategist Marko Papic said investors are wrong to get bearish on rising yields, which reflect robust growth. He argued the Federal Reserve is targeting long-term inflation expectations tied to geopolitics, not growth or asset prices, and that the war in Iran is effectively over. <\/p>\n “Want to be a bear? Beware tax increases in the U.S.,” he wrote. <\/p>\n Papic said U.S. individual, corporate, and capital gains tax rates “have bottomed.” He expects a Democratic sweep in the midterms, putting the odds near 75% versus 64% on Polymarket, and sees Democrats campaigning on budget discipline and tax hikes as early as summer 2027. <\/p>\n “The U.S. fiscal lever is done as a tailwind to growth,” the strategist wrote, “but taxes are looming as a serious headwind.” History suggests a single tax change rarely moves equities, since such changes are usually announced well ahead and priced in. Packages that raise several taxes at once do. <\/p>\n Not finding the right stocks? Our AI’s list of investor-grade stock picks for October just dropped \u00bb<\/a> <\/p>\n Markets announcing increases to two or more taxes in the same month had lagged MSCI World by about 3% in the prior six months and ended the next year about 6 points behind. Of 51 packages in BCA’s sample, 65% lagged. <\/p>\n Corporate tax hikes announced on their own were followed by no underperformance. Papic said investors appear to read a package as a signal of fiscal stress and weaker growth, and that equities, not currencies, drove most of the shortfall. Bond yields gave no warning beforehand. <\/p>\n Papic pointed to recent examples. France lagged MSCI World by about 9% in the six months before its October 2024 budget, which combined a surtax on large companies with a minimum tax on high earners. The U.K. lagged by 3% to 6% before each of its last three tax-raising budgets. <\/p>\n Booming profits and growth mean higher taxes are unlikely to end the bull market yet, he said, though investors should expect “indigestion in 2028, or maybe even 2027.” <\/p>\n Papic flagged rising wages in 2027, which could make the Fed genuinely hawkish, as the other risk to watch. <\/p>\n Original Article <\/p>\n Want to be a stock market bear? BCA says watch potential U.S. tax increases<\/a> <\/p>\n U.S. stock futures dip as Treasury yields resume climb, oil prices rise<\/a> <\/p>\n