The investment bank’s models show the average calendar-year return for the S&P 500 could shrink to 5.7%, roughly half the level since World War II.

Millennials and Generation Z might not enjoy the robust returns from U.S. stocks that helped swell the retirement accounts of their parents and grandparents, according to a team of equity analysts at J.P. Morgan Securities.

Over the next decade, the average calendar-year return of the S&P 500 

SPX-0.14% could shrink to 5.7%, based on the models maintained by a team of strategists at JPMorgan focused on long-term market performance. That is roughly half the pace of returns seen since the end of World War II.

The basis for their argument was mostly mathematical. Current stock-market valuations are high relative to history, largely due to the performance of a handful of megacap stocks like the members of the Magnificent Seven.

Reams of historical data suggest that, over the long term, valuations should return to the mean, which should translate to lower stock-market returns in the years ahead.

With a current trailing price-to-earnings ratio of 23.7 times, the S&P 500 is about 25% more expensive relative to its 35-year average of 19 times. Robert Shiller’s Cyclically Adjusted PE ratio, another valuation metric used by the team, showed stocks are even more richly valued currently.

But as is often the case in markets, models rarely tell the whole story. So the JPM team theorized some fundamental factors that could weigh on stock-market returns going forward.

The most obvious, according to them, is the pace at which the U.S. population — and indeed, much of the global population — is aging. Older investors tend to shirk stocks in favor of more conservative investments, like bonds.

This could help to weigh on the average household allocation to stocks as more baby boomers and older members of Generation X reach retirement age. Currently, that allocation is at record highs, as the chart below shows.

“Multiples could come down because aging induces the growing cohort of elderly baby boomers to lower their equity allocations, currently at record highs, in line with their shrinking investment horizons,” said strategist Jan Loeys and Alexander Wise said in a report.

But there are other issues out there that could weigh on stock-market returns ahead. The team also questioned whether corporations could can continue to expand after reaching record highs during the COVID-19 pandemic.

Globalization and growing market concentration had helped profits grow more quickly than the economy since the early 1990s, as did generous corporate tax cuts. But tax rates could rise as the U.S. scrambles to reduce its budget deficits.

And although there is not a ton of evidence yet that taking on the biggest companies could yield gains for politicians, the team noted that antitrust actions by the U.S. government have picked up over the past few years.

If they progress, antitrust efforts by the government could help shake the dominance of some of the largest Big Tech firms, potentially dimming their already exorbitant (relative to recent history) valuations.

Increasing U.S. political instability and dedollarization could also emerge to diminish equity returns over the long run, the strategists said. Although, so far, neither has had much of a discernible impact on markets.

In fact, U.S. markets have proven remarkably resilient to rising government budget deficits, the team said. But that could change over the next five or 10 years, as foreign investors become less enthusiastic about dollar-denominated assets.

The team concluded their analysis with a caveat: their observations are only useful over the long run. They shouldn’t be applied with the purpose of trying to time the market.

“Valuations…are great at informing us about returns over long holding periods but are quite poor at giving us a clean direction, up or down, over the near term,” the team said.

The S&P 500, Nasdaq Composite  COMP0.04% and Dow Jones Industrial Average  DJIA-0.15% tallied their worst calendar-year performance since 2008 in 2022, but since then, all three have made a remarkable comeback.

The S&P 500 rose by more than 24% last year, and is up more than 18.5% so far in 2024, according to FactSet data. The index was on the cusp of a fresh record closing high on Tuesday as traders awaited the latest interest-rate decision from the Federal Reserve. And the Dow was poised for another record close of its own.

The Nasdaq was also trading higher on Tuesday, but remained well below its July record high.

Read the full article HERE.

As we head into 2025, the gold market is witnessing a remarkable sequence of ‘events.’

There is no gold bull market without participation of gold miners.

Admittedly, gold miners have been lagging, tremendously in fact. But that’s changing ‘as we speak’ because gold miners are now staging epic secular breakouts.

In this article, we repeat the fundamental drivers underpinning this gold bull market. We also look at gold miners which are coming to life and will amplify the gold bull market.

Dominant Gold Price Drivers

Rising inflation expectations

Inflation expectations have proven to be a dominant market dynamic driving gold prices higher in this new gold bull market. 

As inflation is stabilizing, globally, inflation expectations are on a steady path higher. Investors are increasingly turning to gold as a hedge against normalizing inflation. 

Essentially, what happened in 2022 is that aggressive disinflationary policies introduced by policy makers pushed the real inflation rate lower. This, in turn, affected the gold price. 

Historical data reveals that gold performs exceptionally well when inflation expectations are on the rise, as explained in great detail in Gold Price Drivers Remain Very Bullish Ahead Of 2025. 

This trend is particularly relevant today, as inflationary pressures are pushing gold to new levels. The current economic environment, characterized by dominant dynamics around inflation and geopolitical tensions, is setting the stage for a continued rise in gold prices.

As we approach 2025, the rise in inflation expectations is expected to maintain momentum. This trend highlights the strength of gold as an investment asset, emphasizing its role as a key asset for smart and diversified investors.

Central bank purchasing: A supportive yet secondary dynamic

While central bank purchases of gold have certainly contributed to the bullish trend, they are secondary to the primary driver of rising inflation expectations. Central banks have been actively increasing their gold reserves, providing a supportive backdrop for gold prices.

Recent data from July 2024 indicates a substantial increase in central bank gold purchases, reaching 37 tons. This represents a notable rise in demand and helps support gold prices. However, it is important to recognize that the main catalyst for gold’s current bullish trend remains the growing concerns about inflation.

Central bank buying is an important component of the overall gold market dynamics. Primary and secondary price influencers for price of gold are nicely explained in this well researched gold price prediction.

Gold Miners: From Lagging to Leading

Gold mining stocks have faced a challenging period over the past 18 months. If anything, they have been lagging significantly behind the performance of bullion prices. This underperformance has been a divergence from the strong gains in gold itself. 

However, the tide is turning for gold miners. Moreover, it has happening NOW.

One key factor driving the recent turnaround in gold mining stocks is the decline in crude oil prices. Lower oil prices reduce operational costs for mining companies, which is a significant advantage in an industry where energy expenses are a major component of overall costs. 

Additionally, the surge in bullion prices is providing a strong incentive for mining companies to push their production up, affecting their revenue and profit margins.

These positive changes in market conditions are creating a perfect storm for gold miners, setting the stage for a potential breakout. 

What makes this breakout so exceptional is that it’s occurring on a secular timeframe, marking a significant shift in the long-term trend. This is a major milestone in the gold mining sector. Surprisingly, this pivotal development has largely gone unnoticed by mainstream financial media. However, JPost.com is spotlighting this decisive evolution and is eager to share this important news with its readers.

Gold Miners’ secular breakouts happening now

The HUI Gold Bug Index, a leading benchmark for gold mining stocks, is showing a dramatic bullish breakout. 

This chart breakout is particularly noteworthy given the index’s previous period of underperformance. 

The recent uptrend suggests that gold mining stocks are set for a significant recovery and could experience substantial gains (in the quarters and years to come) for as long as gold prices continue to rise.

Furthermore, we look at a ratio chart. What’s interesting and insightful about ratio charts is that they express the value of a market segment expressed in another leading segment.

In particular, we like the HUI/Dow ratio a lot. It compares gold mining stocks to the defensive segment of the market represented by the Dow Jones Index. 

As seen below, the HUI/Dow ratio has a chart pattern that exhibits a breakout out from a 12-year downtrend. This indicates that gold miners are gaining relative strength and suggests a promising outlook for the sector. 

Opportunities and Considerations

The bullish development in the gold mining space represents a compelling investment opportunity. With gold prices driven by rising inflation expectations and favorable market conditions, gold mining stocks are likely to see considerable upside. 

More importantly, gold miners are likely to fuel the gold bull market by improving even more bullish sentiment.

However, it is essential to remain mindful of potential risks. Gold miners are traditionally very volatile, and individual stocks come with individual risks. For investors seeking some safety, it is safe to consider either the leading gold mining ETFs and/or the large cap gold miners. 

Conclusion

The gold market is entering a new phase as we head into 2025. This environment which is very favorable for gold  is now having an impact on gold miners. They are finally emerging from a period of underperformance. 

With favorable conditions, including high bullion prices and declining crude oil costs, gold mining stocks are set for a rebalancing act.

Read full article HERE.

Gold prices charged to a record high on Monday as a weaker dollar and the prospects of aggressive U.S. monetary policy easing boosted non-yielding bullion’s appeal.

Spot gold was up 0.4% at $2,586.04 an ounce by 0914 GMT after touching a record peak of $2,589.59. U.S. gold futures edged up by 0.1% to $2,613.40.

The dollar index eased 0.4%, making gold more attractive to other currency holders.

This week’s key event is the Federal Reserve interest rate decision due on Wednesday. Trader expectations are for a 59% chance of a cut of 50 basis points.

The first U.S. rate cut is getting closer and will be followed by more, supporting gold, said UBS analyst Giovanni Staunovo.

“Any change to the Fed dot plot is likely to result in near-term volatility, but I believe we are still on the path of higher prices over the coming months,” he said.

Bullion becomes generally a more attractive investment in periods of lower interest rates and is considered a safe asset in times of turmoil.

Macroeconomic and geopolitical concerns, U.S. elections and a likely increase in equity market volatility also make a compelling case for increasing investment in gold, ANZ analysts said in a note.

“We expect gold prices to move towards $2,700 in the short term and reach a high of $2,900 by the end of 2025,” the note added.

The FBI said that Republican presidential candidate Donald Trump was the subject of a second assassination attempt on Sunday.

Spot silver gained 1% to $30.95 an ounce, hitting its highest in two months earlier in the session.

Platinum shed 0.2% to $993.70 and palladium was up 0.2% at $1,070.70.

Data from China over the weekend showed industrial output growth slowed to a five-month low in August while retail sales and new home prices weakened further.

See full article HERE.

The U.S. government for the first time has spent more than $1 trillion this year on interest payments for its $35.3 trillion national debt, the Treasury Department reported Thursday.

With the Federal Reserve holding benchmark rates at their highest in 23 years, the government has laid out $1.049 trillion on debt service, up 30% from the same period a year ago and part of a projected $1.158 trillion in payments for the full year.

Subtracting the interest the government earns on its investments, net interest payments have totaled $843 billion, higher than any other category except Social Security and Medicare.

The jump in debt service costs came as the U.S. budget deficit surged in August, edging closer to $2 trillion for the full year.

With one month left in the federal government’s fiscal year, the August shortfall popped by $380 billion, a dramatic reversal from the $89 billion surplus for the same month a year prior that was due largely to accounting maneuvers involving student debt forgiveness.

That took the 2024 deficit to just shy of $1.9 trillion, or a 24% increase from the same point a year ago.

The Fed is widely expected to lower rates next week, but just by a quarter percentage point. However, in anticipation of additional moves in future months, Treasury yields have tumbled in recent weeks.

The benchmark 10-year note last yielded about 3.7%, down more than three-quarters of a percentage point since early July.

See full article HERE.

The price of gold has soared to new heights this year and is positioned to climb into early 2025, rising to new record highs, according to Goldman Sachs Research. 

The precious metal has increased more than 20% this year, peaking at a record of more than $2,500 per troy ounce in August. Goldman Sachs Research forecasts the price will reach $2,700 by early next year, buoyed by interest rate cuts by the Federal Reserve and gold purchases by emerging market central banks. The metal could get an additional boost if the US imposes new financial sanctions or if concerns mount about the US debt burden.

Gold is our strategists’ preferred near-term long (the commodity they most expect to go up in the short term), and it’s also their preferred hedge against geopolitical and financial risks.

“In this softer cyclical environment, gold stands out as the commodity where we have the highest confidence in near-term upside,” Goldman Sachs Research strategists Samantha Dart and Lina Thomas write. They point to three factors in particular that could push gold prices higher:

Investors may need to be more selective when investing in other commodities, given softening in the global economy, according to Goldman Sachs Research. Our strategists make note of several challenges:

Commodities still deserve a place in investors’ portfolios as they provide hedges against supply disruptions, among other things, according to Goldman Sachs Research. Select industrial metals could also experience sharp rallies, driven by a combination of long supply cycles and increased demand related to energy security and decarbonization efforts. Overall, our strategists expect a total return of 5% for the GSCI Commodity Index in 2025, down from the 12% total return it expects for this year. 


Read the full article HERE.

Gold has hit a new all-time high of $2,546, breaking previous resistance levels. With inflation, geopolitical tensions, and rising demand, gold’s surge signals its strength as a safe-haven asset.

Today, gold set a new record high, reaching $2,546 per ounce, surpassing its previous peak and marking a historic moment in the precious metals market. This new all-time high not only sets a fresh benchmark but also signals a significant breakout above previous resistance levels, which had kept gold trading within a narrower range for months. The breach of these resistance levels indicates a strong bullish momentum and opens the door for further potential gains. Amid global economic uncertainty, rising inflation, and geopolitical tensions, investors are flocking to gold as a safe haven, once again proving its resilience.

PPI Comes in Hot: How Economic Data is Feeding Gold’s Rise

Adding fuel to gold’s recent surge, the Producer Price Index (PPI) came in hotter than expected. The PPI rose by 0.2% month-over-month (MoM), compared to the expected 0.1%. The PPI Core, which excludes volatile food and energy prices, also outpaced expectations, increasing 0.3% MoM, versus the forecasted 0.2%.

Despite this economic data, which wasn’t overwhelmingly bullish for gold compared to other assets, the precious metal saw a notable rise. Stocks experienced a mild uptick, the dollar dipped slightly, silver strengthened, and copper remained stagnant. This suggests there was already pent-up buying pressure in gold waiting to be triggered, as the PPI numbers were enough to push it past the threshold. This indicates a weak lid on the market, making gold susceptible to further upward pressure.

Why Gold is Soaring

Several factors, in addition to the PPI report, have contributed to this unprecedented surge in gold prices:

1. Inflation Concerns

One of the primary drivers behind gold’s rally is the persistent fear of inflation. As central banks, including the U.S. Federal Reserve, struggle to balance interest rates with economic growth, the cost of goods and services continues to climb. Historically, gold has been seen as a hedge against inflation, making it an attractive option for investors looking to preserve their wealth.

2. Geopolitical Tensions

Geopolitical events have also played a key role in pushing gold prices to new heights. Ongoing conflicts, particularly in Eastern Europe, rising tensions in the Middle East, and economic sanctions against major global players have led to increased demand for safe-haven assets. Investors often turn to gold when there’s uncertainty on the international stage, as it tends to hold its value better than other assets in times of crisis.

3. De-Dollarization Efforts

Countries like China, Russia, and other BRICS nations are actively pursuing de-dollarization, seeking to reduce their reliance on the U.S. dollar. These nations have been stockpiling gold as a way to diversify their reserves and protect their economies from potential economic sanctions or shifts in the global financial order. As more nations follow this trend, the demand for gold has surged, pushing prices higher.

4. Interest Rate Decisions

The U.S. Federal Reserve’s recent comments on potential interest rate hikes have added fuel to gold’s rally. While higher interest rates typically lead to a stronger dollar and lower gold prices, the uncertainty around these rate hikes has caused volatility in the markets. Investors are flocking to gold as a stable asset in an otherwise unpredictable economic environment.

5. Supply Chain Disruptions

The mining and production of gold have also faced challenges due to disruptions in the global supply chain. The pandemic, coupled with environmental regulations and labor shortages, has slowed down gold extraction in several key regions. This has led to tighter supply, further driving up the price.

See Full Article HERE.

In this graphic, we ranked the top 12 countries by their rate of millionaire population growth, from 2023 to 2028 (forecasted).

It reveals a variety of emerging markets (as well as a few developed economies) where the millionaire population is expected to increase by more than 20% over the next five years.

All figures come from the UBS Global Wealth Report 2024. Note that this analysis covers 56 countries, and is based on the number of U.S. dollar millionaires.

In this graphic, we ranked the top 12 countries by their rate of millionaire population growth, from 2023 to 2028 (forecasted).

It reveals a variety of emerging markets (as well as a few developed economies) where the millionaire population is expected to increase by more than 20% over the next five years.

All figures come from the UBS Global Wealth Report 2024. Note that this analysis covers 56 countries, and is based on the number of U.S. dollar millionaires.

Leading this ranking is Taiwan, which UBS expects will have over one million millionaires by 2028.

While organic growth is expected to account for some of its growth (primarily due to its powerful micro-chip industry), analysts expect the bulk of this increase will come from the immigration of wealthy foreigners.

In second place is Türkiye, with a projected 43% increase in millionaires by 2028. This could be due to various reasons, including the country’s growing tech sector.

According to the World Economic Forum, Turkey hosts six unicorn companies (startups valued at over $1 billion).

These are: Peak Games, Getir, Dream Games, Hepsiburada, Trendyol and Insider (an AI tech company not related to the media company Insider Inc.).

Which Countries Will Lose Millionaires?

While this UBS analysis doesn’t cover the entire world, their report does highlight two countries that will lose millionaires by 2028: The Netherlands (-4%) and the UK (-17%).

These projections line up with recent data from Henley & Partners, which estimated that nearly 10,000 millionaires would leave the UK in 2024.

Read the full story HERE.

Adam Hamilton, the founder of Zeal Intelligence, a financial consulting company, predicts that gold prices will rise as American investors turn to gold, fleeing from traditional stocks and the burst of the artificial intelligence (AI) bubble. Hamilton explained that gold experienced this price upswing without this main demand factor, stressing that it was a very bullish circumstance.

Gold might still have the strength to keep climbing in the current geopolitical and economic situation. According to Adam Hamilton, the founder of Zeal Intelligence, gold prices are poised to keep climbing as Americans dive into precious metals as the stock market and artificial intelligence (AI) bubbles burst.

In an article published on Mining.com, Hamilton states that gold prices reached this level, rising 38.7% in less than 11 months, registering several all-time highs without the usual suspects behind this surge during this period.

He pointed out that this gold bull market has been powered mainly by Chinese investors and central banks, with the participation of gold futures speculators. He explained that demand is unlikely to slow in the short term as stock markets rout while yuan gold keeps surging.

Gold’s popularity is also related to the pessimistic forecasts for the U.S. dollar. Hamilton declared:

With out-of-control US-government spending still ramping the mind-boggling US debt while Treasury interest expenses soar, the US dollar’s fundamental outlook is dismally-bearish. Nothing beats gold for weathering globally-rampant fiat-currency inflation and debasement.

This, and the comeback of the demand from American investors, can potentially take gold to over $2,950 if $100 billion – what Hamilton calls “pocket change” – from the stock market drips to gold alternatives. However, Hamilton states that the bull market gains will be even higher as stock investors will need “many months if not years” to reestablish even trivial 1% gold allocations.

Other analysts and banks have also predicted increases in gold prices. Goldman Sachs analysts recently stated that they had the highest conviction that gold would reach $2,700 per ounce as soon as next year.

Read the full story HERE.

When the yield curve turns positive, the country is usually about to plunge into recession. Hope this time relies on a few historical exceptions.

Two years ago, the inversion of the yield curve—shorter-dated Treasurys yielding more than longer-dated bonds—was taken by investors as a surefire sign of recession. Now Wall Street worriers have a new concern: The yield curve is back to normal, a surefire sign of recession.

It might seem odd, but both yield-curve moves are indeed good signs of recession, though not foolproof ones. What really matters is why Treasurys move as they do, and in this case it comes down to the Federal Reserve.

The Fed is expected to embark on a series of interest-rate cuts starting next week, which is why short-dated bond yields have fallen fast, uninverting the yield curve when measured as the 10-year minus two-year yield. If those cuts are purely because inflation has dropped back close to target, that is the ideal of a soft landing for the economy, and absolutely not a sign of imminent recession.

But for most of modern history, deep rate cuts by the Fed have been a sign that the country is about to plunge into recession, or is already in one that economists missed.

The yield curve is rather a crude representation of this problem. The inversion of the past two years tells us that investors thought the Fed had rates temporarily high and they would be lower in the long run. It doesn’t tell us why.

Look at recent market action and you see investors are vacillating between the reasons for rate cuts. Some days they think a weaker economy, particularly a weaker jobs market, will push the Fed to try to boost growth with rate cuts. That is bad news for stocks, because weaker growth might turn into a recession.

Other days, they think growth is fine but lower inflation will allow the Fed to cut rates anyway. That is good for stocks, because it means cheaper financing combined with decent after-inflation profits.

History tells us that in the past when the Fed raised rates a lot, it almost always caused a recession. History also tells us that when the Fed embarked on a big series of rate cuts, it was almost always because of a recession.

The combination gives us the oddity that inverted yields curves appear to predict recession, since they typically result from the Fed raising rates a lot, and uninverting yield curves appear to predict recession since they typically result from the Fed cutting rates a lot. At the moment, futures traders are pricing in 2.5 percentage points or more of rate cuts by the end of next year, which is a lot to cut without a recession. 

Hope this time rests on the historical exceptions. There were soft landings in the mid-1960s, mid-1980s and mid-1990s despite big rate rises. In the mid-1960s and very briefly in the mid-1990s, at least some measures of the yield curve inverted, although nowhere near as long or as deeply as in the past couple of years. In the mid-1980s, there was a soft landing without an inverted yield curve after big rate rises turned into rate cuts as large as the markets are predicting by the end of next year.

There is also the question of which yield curve to choose. Economists prefer to compare the 10-year yield with the three-month yield, which captures only impending rate cuts and has a better track record than the two-year used by many investors. The 10-year minus three-month curve is still a long way from uninverting, confusing the picture still further.

None of the historical examples involved both an inverted curve and such rapid predicted cuts. This is where the market might have things wrong. There are good reasons to think investors might be overdoing it in pricing in such deep cuts combined with a soft landing, given the upward pressures on long-term rates from huge and apparently permanent fiscal deficits, increased protectionism and the need for higher defense and energy spending globally.

Yet, if inflation stabilizes close to the Fed’s 2% target, interest rates of 3% are perfectly conceivable for a while. Which takes us back to the deep problem that investors have to wrestle with. Is the slowdown in the economy the start of a slide into recession or a return to normal after the bust-boom cycle of the pandemic?

The economic data have undoubtedly been disappointing, but on the plus side they don’t suggest the economy is in trouble at the moment.

Unfortunately, if a recession is on the way, even quite aggressive rate cuts might not stop it. True, higher rates have held back some corporate investment, hit poorer and younger borrowers and made it more difficult for indebted businesses when fixed-rate debt matures.

But the economy as a whole is much less sensitive to rates than it used to be because so much debt is fixed at low rates for long periods, both for mortgages and big companies. Companies have been pouring money into building new factories despite the Fed thanks to government subsidies. And rate cuts take time to affect the economy anyway.

Investors should be careful about taking too much from the yield curve. Right now it tells us what we already know—that the Fed is about to cut rates—without telling us what we really want to know: whether a recession is imminent.

Read the Full Article HERE.

The selloff caused by a levy on unrealized capital gains would devastate ordinary investors and 401(k)s.

Kamala Harris has doubled down on her support for a radical new tax on the unrealized capital gains of the ultrarich. She calls it the “billionaire minimum tax,” but it would be better to call it the “capital markets death tax.” It would crush the U.S. stock market, grind initial-public offerings to a halt, and hit you in the 401(k).Federal capital-gains taxes have historically applied only when an asset is sold and income from the sale is realized. In recent years the left has been looking for a way to increase levies on the wealthiest Americans by taxing the appreciation of their assets, even if their assets aren’t sold and income isn’t realized. Sen. Ron Wyden (D., Ore.) proposed such a tax in 2021. President Biden offered his support in his 2024 State of the Union address and 2025 budget, which Ms. Harris has now endorsed.

The Biden-Harris wealth tax would apply a minimum annual 25% tax on the income and unrealized capital gains of Americans worth more than $100 million. Mr. Biden’s 2025 budget estimates without justification that this tax would generate $500 billion in new tax revenue over the next 10 years. He proposes using that windfall to expand social programs for U.S. households in need.

Yet the Biden-Harris wealth tax would send public markets into a tailspin and hurt all investors, not only the wealthiest. Billionaires alone own more than $5 trillion in stock, or 7% of the entire stock market. Public stock represents 66% of their wealth, so they would need to sell hundreds of billions of dollars worth of stock to fund their wealth-tax payments. These sales would drive down stock prices and, therefore, returns for all investors. The largest, most innovative and fastest-growing U.S. tech companies would be hit the hardest. Unrealized capital gains are concentrated in these companies.

This wouldn’t be a one-time problem. Stock sales would need to continue each year to pay the annual wealth tax. This would be a long-term drag on the returns of all investors, while also reducing the skin in the game of the innovative founders who built these companies. The wealthiest Americans would be entitled to tax refunds in future years if the value of their remaining stock holdings goes down, but that wouldn’t diminish the effect of the tax on capital markets.

U.S. taxpayers with assets of more than $100 million hold approximately $4 trillion in unrealized capital gains in the shares of private companies. Selling these investments to cover a tax bill is even more difficult than selling stock in public companies. Private companies generally don’t have active trading markets, so finding a buyer can be difficult and the cost of selling high. These sales can also disrupt the growth of private companies, which are often managed by their owners.

The Biden-Harris tax therefore includes an exemption from the proposed wealth tax for ultrarich investors who have 80% of their wealth in nontradable illiquid assets, such as investments in private companies. This would create a major incentive for the wealthiest Americans either to delist the public companies that they control or to keep their private companies from going public in the first place. If the ultrarich respond this way, it would reduce projected tax revenue and hurt all investors by shrinking the size of public markets.

Public markets are already small and getting smaller. In 1996 there were more than 8,000 public companies in the U.S. Today there are fewer than 5,000. Private markets are increasingly able to support the capital needs of large companies. There are now more than 700 private companies worth more than $1 billion and more than 40 private companies worth more than $10 billion. The most innovative and fastest-growing U.S. companies are private. Some are worth more than $100 billion, including OpenAI and SpaceX. Will Sam Altman and Elon Musk take these companies public if doing so comes with a multibillion-dollar tax bill?

Billionaire founders also have voting control over many large public companies through dual-class share structures and can therefore potentially force a delisting of their public companies to save billions in taxes. Perhaps the trillion-dollar megacap technology stocks are too large to take private, but investors in these companies will suffer too as their billionaire founders shift their attention to private companies where they can better reap the returns of their innovations.

The shrinkage of public markets is a big deal for anyone with a 401(k), as 90% of U.S. investors don’t meet the minimum wealth and income requirements to invest in private markets. If Ms. Harris has her way, it could do irreparable harm to Americans’ ability to pay for their retirements. The left’s desire to punish the ultrarich for their success will end up hurting the rest of us.

See full story HERE.