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Weekly Market Recap: April 15, 2024

Weekly Market Recap: April 15, 2024

Posted April 15, 2024 at 10:30 am

J.P. Morgan Asset Management

The week in review

  • CPI grew 0.4% m/m (3.5% y/y) in Mar.
  • Consumer sentiment declined to 79.4 in Mar.

The week ahead

  • Retail sales
  • Housing starts

Thought of the Week

With Tax Day on April 15, it’s a good time to explore the relationship between the stock market and taxes and particularly how big capital gains tax payments may impact the stock market. This week’s chart shows an interesting trend: capital gains tax revenues tend to spike in fiscal years when the market undergoes significant sell-offs. In previous major market downturns, such as those in 2000, 2008 and 2022, it’s plausible that capital gains tax realizations could have intensified these sell-offs.

One hallmark of a strong bull market is heavy trading as investors try to take advantage of a rising market or protect themselves against an impending correction. However, this trading results in the realization of significant capital gains, with taxes due by April of the following year. As investors fulfill their tax obligations, they often sell stocks to generate the necessary funds, leading to a drawdown in the market. This phenomenon likely played a contributing role in the sell-offs observed in 2000, 2008 and, to a lesser extent, 2022.

However, this phenomenon may be less prevalent today, due to the more widespread use of low-turnover passive investments and tax-aware strategies. Because of this, capital gains taxes relative to the size of the market are expected to be lower this year compared to the peaks witnessed in the first decade of this century. While there are some similarities between the strong stock market surge of the last 18 months and tech bubble of the 1990s, the market’s vulnerability to capital gains tax payments probably isn’t one of them.

Chart of the Week: Source: Congressional Budget Office, FactSet,
Wilshire, J.P. Morgan Asset Management.

Thought of the week: Source: Congressional Budget Office, FactSet,
Wilshire, J.P. Morgan Asset Management.

Originally Posted April 15, 2024 – Weekly Market Recap

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Disclosure: J.P. Morgan Asset Management

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

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