There are just a few trading hours left until the weekend, but big news is brewing on Wall Street. With that in mind, what will the stock market do today?
Before you dive into the top stories, take a look at the major indices. All are in the green, recovering from a capital gains tax selloff on Thursday. The S&P 500 is up 0.85% and the Dow Jones Industrial Average is up 0.55%. The Nasdaq Composite is also up, to the tune of 0.97%.
What Will the Stock Market Do Today? Crypto Panic.
Cryptocurrencies are not immune from the capital gains tax panic.
Yesterday a Bloomberg report hit the market, sending major indices down fast. Investors were processing news that President Joe Biden is considering doubling the capital gains tax from its current 20% base rate. Investors making more than $1 million would pay 39.6% plus an additional 3.8% levy. Although stocks are recovering on Friday morning, cryptocurrencies are still facing selling pressure. At the time of this writing, Bitcoin (CCC:BTC-USD) is still below $50,000.
Altcoins were hit harder, likely due to their outperformance relative to Bitcoin in recent days. Following the capital gains news, Ethereum (CCC:ETH-USD), XRP (CCC:XRP-USD) and Dogecoin (CCC:DOGE-USD) saw significant pullbacks. Exchanges also saw the highest inflows since March 20, a sign that investors are looking to liquidate their positions.
So where do things go? Although a sense of crypto panic has certainly hit Wall Street on Friday, not everyone thinks it’s a bad thing. Crypto insider Tyler Winklevoss tweeted that BTC at $49,000 was an “opportunity.” Another analyst said that cryptocurrencies, over the long term, will not be affected by the higher capital gains tax rate to the same extent. This is because the values of crypto bulls encourage investors to hold without the intent to sell.
#Bitcoin at 49k equals opportunity
— Tyler Winklevoss (@tyler) April 23, 2021
There’s another Bitcoin story: Turkish crypto exchange Thodex is caught up in a major scandal that has affected more than 390,000 users and cost a total of $2 billion in investments. As Cointelegraph reported, Thodex has halted trading and Turkish police have already detained 62 people over reports of an exit scam. Thodex owner Faruk Fatih Özer has fled the country. What does this mean for investors? Turkey is already about to implement a new ban on April 30 that will prohibit holders from using their cryptos as payments. This could further weigh on BTC.
The Troubling Trifecta in Action
Earlier this week we wrote about the troubling trifecta — the intersection of reopening-fueled revenge spending, rising consumer prices and what the New York Times has called the YOLO Economy. Although positive economic indicators and the Covid-19 vaccine rollout have set the stage for a return to normal in July 2021, this intersection is brewing beneath the surface. The potential outcome? Many Americans could find themselves cooped up at home for longer than expected with less money in their wallets and unstable or nonexistent employment.
Writing for Axios, Dion Rabouin introduced another factor at play. Wages. Although we now know from companies like Procter & Gamble (NYSE:PG) that consumer goods prices are rising, wages are staying stagnant. In fact, most Americans don’t expect wages to rise anytime soon. With 87% of Americans worried about inflation, households are already cutting back.
A new poll shows that 33% of Americans making $50,000 or less are already buying less because they have noticed the pinch on their pocketbooks. In a group of Americans making between $50,000 and $100,000, that figure is 25%. Even more Americans have flagged that they have noticed the hike in prices, but they continue to buy at the same rates.
That could change. As Rabouin writes:
“If and when government assistance dries up, a growing share of Americans may find that the booming economy and its steadily increasing prices have further left them behind.”
We already know that multiple rounds of stimulus checks have contributed to some of the buzz in the stock market. Rabouin also points to measures like enhanced federal unemployment benefits, mortgage forbearance and eviction moratoriums. The current mortgage forbearance program ends on June 30, 2021, and Biden has called for a return to normal on July 4, 2021. This is a tight timeline that requires a high herd immunity threshold. Keep this story top of mind.
Emissions and Earth Day
Yesterday was Earth Day, a holiday that global political and business leaders did not fail to note. In fact, at least 40 of them joined Biden for a virtual climate summit. The result is a handful of new emissions goals, and hopefully, an upside catalyst for green energy stocks.
During the summit, Biden said that the United States’ new goal is to cut greenhouse gas emissions by 50%-52% by 2030, relative to 2005 levels. This goal is, as Axios writes, much more ambitious than the previous emissions goal under President Barack Obama. In order to achieve this goal, industries will have to embrace a shift to clean energy.
We already saw one part of this earlier this week, when a Wall Street Journal report sparked a rally in electric vehicle (EV) stocks. Biden is moving to drop a battle between the White House and California, allowing the state to pursue its own strict emissions standards on automakers. With Biden now targeting an ambitious goal for the entire country, we could see new federal targets on automakers that boost consumer adoption of EVs. This also comes as the American Jobs Plan promises to boost consumer adoption through job creation and widespread spending on electric vehicle infrastructure.
One thing to watch: Not everything about this story is green and shiny. Republicans just introduced their counter to the American Jobs Plan, and it comes in with a much lower price tag of $568 billion. Its primary focus is a $299 billion investment in improving roads and bridges, with broadband, public transit and drinking water also getting top spots. Absent from the proposal is funding for electric vehicles or other clean energy initiatives.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.