US stocks trade mixed as investors mull proposed capital gains take hike

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Markets are increasingly concerned that inflation could whack stocks

US stocks were mixed on Friday after falling the day prior on fears of the capital gains tax hike proposed by president Joe Biden that would nearly double the capital gains ta for wealthy Americans.

Investors are now analyzing the implications of the proposed higher taxes and what will this mean for the financial system. David Bahnsen, chief investment officer, The Bahnsen Group, a wealth management firm, said Biden’s plan will have a negative impact on the stock market, though it is as yet unclear how big an impact it will have.

“If the stock market really started to believe that the capital gains tax would double in 2022, it’s entirely possible that there would be an acceleration of selling towards the end of this year and into early 2022,” he told Insider.

Bahnsen added that raising capital gains taxes is a disincentive for investors to sell their stocks at the appropriate time.

“Not selling an asset that should be sold due to fear of taxes is distortive to markets,” he added.

But congress is likely to settle on a much more modest increase in capital gains tax than Biden would like with the eventual figure likely to land at around 28%, analysts at Goldman Sachs said in a note Friday.

Here’s where US indexes stood at the 9:30 a.m. ET open on Friday:

Skillz jumped as much as 8% on Friday after Cathie Wood’s ARK Innovation ETF added another 1,222,207 shares of the mobile gaming platform to its holdings the day before.

In cryptocurrencies, bitcoin slid below $50,000 with $260 billion wiped off the crypto market as Biden’s tax proposals crushed risk appetite. Others digital assets tumbled as well. Ether fell 7% to around $2,220, dogecoin fell 17% to $0.17, and XRP dropped 8%.

“It is clear that bitcoin is more sensitive to capital gains tax threats than most asset classes,” Jeffrey Halley, a senior market analyst at OANDA, said.

Oil prices held steady Friday as Covid-19 concerns, especially in India, rose to new highs. West Texas Intermediate crude slipped 0.13% to $61.35 per barrel. Brent crude, oil’s international benchmark, was also lower 0.26% to $65.25 per barrel.

Gold climbed slightly by 0.5% to $1,797.52 per ounce thanks to lower US Treasury yields as well as a weaker dollar. The precious metal is on track for its third weekly gain.

 
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