The financial rating agency Standard & Poor’s yesterday confirmed on Thursday the AA rating for the United States’ long-term debt with a stable outlook. The rating wars, which used to be relevant and capable of moving trading floors, are long over, but investors may also take advantage of such a driver.
However, behind-the-scenes talk about the country's most powerful tax hike since 1993 may turn out to be more serious than it seems at first glance. The Biden administration is capable of such decisions and if the market receives confirmation of this by next week, then capital markets could turn around and drop from recent highs.
Before that time, the S&P 500 could reach 4,000 and correct at least 7% lower. The DJIA could rally to 33,400, given that the markets look supportive, and then plunge 5-8% from that level.
The tax factor could completely outweigh all positivity from the new stimulus program for capital markets, since the authorities are putting money into consumers’ pockets with one hand, and taking it out with the other.