S&P 500 risks 5% earnings hit from Harris's tax plan: GS

Published On Sep 5, 2024, 2:21 AM

Kamala Harris, a Democratic presidential candidate, has proposed increasing the corporate tax rate from 21% to 28%, which Goldman Sachs estimates could reduce S&P 500 earnings by about 5%. This tax increase is aimed at ensuring larger corporations contribute their fair share. Additionally, potential changes like taxing foreign income and raising the alternative minimum tax could see earnings drop by as much as 8%. Contrastingly, if Republican plans to lower the corporate tax rate to 15% were implemented, S&P 500 companies could see a boost in earnings by 4%. Furthermore, Goldman Sachs analysts believe that while corporate profits might decrease, a Democrat-led administration could benefit the broader economy over the next two years.

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Stock Forecasts

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Negative

Given the proposed corporate tax hike implies a substantial potential reduction in corporate profits, we can anticipate a negative impact on overall market sentiment, particularly for large-cap companies in the S&P 500. If the tax plan progresses as described, companies such as Amazon (AMZN) and Microsoft (MSFT) may see their stock prices negatively affected due to lower earnings projections.

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Positive

With the backdrop of possible tax cuts under a Republican administration, companies benefiting from lower corporate taxes could see positive stock movements, especially if investor sentiment sways towards growth stocks in light of tax relief. Companies like Tesla (TSLA) may be positioned to gain if such tax cuts are enacted.

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