Bank of America just put out a big warning that advisors need to pay attention to. The bank is warning that earnings growth could get “vaporized” across a couple of sectors. The reason why is tax hikes. BofA's Savita Subramanian posits that in a scenario where taxes rise to 25% next year (from 21% this year), 5% would be wiped off earnings growth, a huge margin in a year that is already set up to see some cooling after the red hot earnings growth of 2021.
FINSUM: Investors don’t seem to be adequately accounting for this risk. Despite the fact that Biden’s proposals will likely get watered down, there appears a high likelihood that taxes will rise next year.