You keep hearing people say Elizabeth Warren would be net negative for the stock market.
One person says stocks in the U.S. would fall 40%. Maybe that’s a lot. And she would bring some good things to the table too.
Let’s dig in.
First off, she would likely raise the corporate tax rate.
Corporations are taxed on operating profit, so it would be their profits after tax that would get hit with a higher tax rate. Net income estimates would fall. Stock investors price for expected earnings for the next 5 to 10 years plus, so this would bring stocks down.
By the way, if she creates a tax system more favorable to the middle class that what we have at present, maybe most people would spend more. Companies would see higher revenues — a positive for those stocks.
Then there’s tech regulation. Warren wants to separarte subsidiaries owned by tech giants like Facebook, google and Amazon. It’s possible that each business under those roofs are worth more by being owned by their giants than they would be on their own. That’s due to something we;ll explain later, called synergies.
First of all, strip Instagram away from Facebook? Facebook is worth way less. And Instagram is probably worth less too. This policy is a negative for tech stock prices.
Remember, she is doing this to protect you, the user. But we could analyze this for ages.