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Chief economist: Of capital gains taxes, COVID-19 and climate change

It's bad news day on Wall Street overnight with all four its benchmark equity market indices flashing red. The S&P 500, the DJIA and the Nasdaq dropped by 0.9% each, while the Russell 2000 had a smaller decline of 0.3%.

The financial literati were quick to dig up the raison d'etre for this "disastrous" day on Wall Street ... and there are raison's a-plenty.

...and they came in C's.

There's US President Joe Biden's plan to lift the capital gains tax, there's the lingering surge in COVID-19 infections, and there's climate change. Take your pick.

Bloomberg reports that: "President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6% (from 20%) ... For those earning $US1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for wealthy investors could be as high as 43.4%."

This one from Factset on COVID-19: "Indian COVID cases now a serious concern - it broke a one-day new cases record of 315,000 Wednesday and shows no sign of abating. Korea also hitting a second-wave high, Singapore called off its proposed travel bubble with Hong Kong as it found its biggest cluster since September. Manila hospitals still at breaking point."

And... "Japan to declare COVID-19 emergency in four prefectures", being Tokyo, Osaka, Kyoto and Hyogo.

Concerns over climate change was brought back to the fore as the US holds a two-day virtual summit with 40 other world leaders to address the earth's climate crisis and the need for immediate action to reverse its negative impact.

The Australian Financial Review (AFR) cites a Swiss Re report reporting that "the effects of climate change can be expected to shave 11% to 14% off global economic output by 2050 compared with growth levels without climate change".

"That amounts to as much as $US23 trillion ($30 trillion) in reduced annual global economic output worldwide as a result of climate change."

Yes, yes and yes. These are certainly things that go bump in the night (and day).

Whatever happened to the good news of (not metaphorical) yesterday? The day before today when Wall Street was on the up and up - the S&P 500 and the DJIA rose by 0.9%, the Nasdaq by 1.9%, and the Russell 2000 by 2.3%?

Yesterday, investors focused on US company earnings beating consensus expectations, strengthening recovery in global economic growth - so much so that the Bank of Canada (BOC) even made headlines as it became the first central bank in the world to taper - the surge in vaccinations in Europe while at the same time ignoring the resurgence and spikes in infections in India, Japan, South Korea, etc.

Tomorrow will be another day.

Read our full COVID-19 news coverage and analysis here.