The Tell: Here’s an $800 billion reason why stocks may have rallied on Tuesday — and it’s good news going forward

0
27

Investors scrambled for reasons to explain a sharp stock-market surge Tuesday that saw the Dow Jones Industrial Average jump nearly 500 points as major indexes turned in their best performance in a month. A look at the calendar may offer the best explanation, argued Fundstrat co-founder Tom Lee.

“Equities have fallen in a straight line since late March (13 trading sessions) and the decline continued into April 18th,” the deadline for filing federal income tax returns, Lee said in a Tuesday note.

The note highlighted research that shows stocks have tended to suffer in the runup to “Tax Day,” as investors raise cash to pay Uncle Sam, often followed by a sustained bounce in years when investors face hefty tax bills (see chart below).

Fundstrat

They faced a doozy after another big year of gains for equities in 2021, Fundstrat has estimated, putting total capital-gains taxes on equities at a record of more than $800 billion, along with another $150 billion or more for crypto-related capital gains.

Fundstrat found that since 1945, post-Tax Day returns have been strongest following a big up year for the S&P 500, defined as in the top two deciles. The 29% advance for the S&P 500 last year was just shy of the cutoff for the top decile at 29.6% (see chart below).

The Dow DJIA, +1.45% jumped 499.51 points, or 1.5%, Tuesday to close at 34,911.20, while the S&P 500 SPX, +1.61% rose 1.6% and the Nasdaq Composite COMP, +2.15% advanced 2.2% — the biggest percentage gains for all three indexes since March 16, according to Dow Jones Market Data.

This article was originally published by Marketwatch.com. Read the original article here.

Previous articleASML reports net income more than halved, though sales at higher end of guidance
Next articleNetflix bond spreads widened late Tuesday after earnings showed it losing customers for the first time

LEAVE A REPLY

Please enter your comment!
Please enter your name here