Will Kamala Harris’s Plan to Raise the Corporate Tax Rate by 33% Cause Stocks to Plunge? History Couldn’t Be Clearer.
2024-09-29 11:41:00
In a little over five weeks, voters will head to the polls or mail in their ballots to determine which path forward our great country will take over the coming four years.
Although there are aspects to fiscal governance that have nothing to do with Wall Street, some of the laws crafted on Capitol Hill by elected officials do have bearing on corporate America and/or taxpayers.
Meanwhile, the Shiller P/E ratio is based on average inflation-adjusted EPS over the previous 10 years. The advantage of looking at 10 years of inflation-adjusted EPS data as opposed to TTM EPS is that it smooths out shock events (e.g., the COVID-19 pandemic) that can easily throw off shorter-term valuation measures like the traditional P/E ratio.
When the closing bell tolled on Sept. 26, the S&P 500’s Shiller P/E was at 36.9. This more or less matches its high for the current bull market rally and is more than double the average reading of 17.16 when back-tested to January 1871.
What’s more concerning is how stocks have reacted following the previous five instances where the S&P 500’s Shiller P/E topped 30 during a bull market. Though there’s no rhyme or reasons to how long valuations can remain extended, the S&P 500, Dow Jones Industrial Average, and/or Nasdaq Composite have all eventually (key word!) lost between 20% and 89% of their value following these occurrences.
There have only been two other periods in 153 years — prior to the dot-com bubble bursting and late 2021/early 2022 — where stocks have been pricier than they are right now.
Although history doesn’t repeat to a “T” on Wall Street, it often rhymes. No matter what happens on Nov. 5, current stock valuations should be the biggest concern for investors.
Should you invest $1,000 in S&P 500 Index right now?
Before you buy stock in S&P 500 Index, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and S&P 500 Index wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $743,952!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 23, 2024
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Will Kamala Harris’s Plan to Raise the Corporate Tax Rate by 33% Cause Stocks to Plunge? History Couldn’t Be Clearer. was originally published by The Motley Fool
