A Joe Biden presidency would be negative for equities in the US and positive for other markets given his plans to hike taxes on companies and wealthy Americans, according to veteran investor Mark Mobius.
Biden's tax increases would reduce the incentive for people to invest in Wall Street stocks, said Mobius, who set up Mobius Capital Partners after three decades at Franklin Templeton Investments. That will "be good for emerging markets and other global equities since there will be a retreat from the US market," he said in an emailed interview on Friday.
Mobius’s comments on Biden come as the Democrat inches closer to the presidency, overtaking President Donald Trump in the the crucial swing state of Georgia, while a global equity rebound shows signs of stalling. The MSCI All Country World Index was little changed on Friday after four days of gains, while US stock futures fell along with shares in Asia and Europe. The global gauge is close to levels where it has faced resistance twice since August.
“The so-called wealth effect will be at play” in the US, Mobius said. "If the people who invest in the stock market expect that their wealth will be hit with higher taxes, they will restrain from investing."
His views are in contrast to some global investors who have said that Biden will not be able to raise taxes easily with a potentially split Congress. The S&P 500 Index is up more than 7% this week, set for the best weekly gain since April. The Nasdaq 100 gauge has surged even more, reflecting expectations of the removal of potentially higher capital gains taxes.
Meanwhile, Trump has questioned the credibility of the election and his campaign has peppered the courts with legal complaints.
A contested outcome would also add "more uncertainty" to the US equity outlook, Mobius said. "Biden's program is to tax the 'rich' – i.e. people earning more than, say, $200,000 a year. These are precisely the people who would be most active in the stock market.”
--With assistance from Namitha Jagadeesh.