The Stock Market Tumbled and I Agree with Donald Trump—Is This the End Times?
If you’re like me, you woke up to a phone chirping with news alerts about the stock market’s freefall. And if you’re like me, you didn’t take those alerts as a sign that you should lose your mind and close out your 401(k). It’s easy to feel nervous when your future is on the line, but if you want to deal with stocks you have to be willing to accept the fact that one data point does not make for a trend. To keep your head in the right space, I’ve collected a couple of smart takes from today’s wild stock-market ride.
Tara Culp-Ressler at ThinkProgress explains:
Experts say that you should not rush to sell on a day when the headlines about the stock market seem particularly bad. The stock market is an avenue for long-term investment that can appear to be unstable on a day-to-day basis. It’s not a good idea to make financial decisions based on a few days of dire headlines, particularly if you’re invested in a diverse portfolio.
Nothing about the events of recent days suggests that the fundamentals of capitalism have changed. So neither should your confidence in very long-term ownership of the pieces of the for-profit enterprises that benefit from your fortitude….Most of us have to save somewhere, and history suggests that stocks are the most accessible route to get the returns you’ll need to retire someday. It would take decades of systemic economic erosion to prove otherwise, and a few days of market declines do not suggest that anything like that is upon us.
Bear in mind, though, that this doesn’t mean that Wall Street is perfect. In fact, I’m about to say something that might blow your minds: I agree with Donald Trump.
No, not on everything. In fact, I disagree with about 99 percent of the things that come out of Trump’s month. But yesterday, Trump identified a significant problem that both Bernie Sanders and Hillary Clinton have recognized in their campaigns:
Donald Trump wants to raise taxes on Wall Street’s hedge funders, who he claims are “getting away with murder.”
“The hedge fund guys didn’t build this nation. These are guys who shift paper around and they get lucky,” Trump told CBS’ Face The Nation on Sunday. “They’re paying nothing and it’s ridiculous.”
Managers of hedge funds and private equity funds, which buy companies with borrowed money, tend to pay the equivalent of capital gains taxes instead of ordinary income taxes. This can result in a significant tax break since the top capital gain rate is 20%, versus a 39.6% top rate on ordinary income taxes.
Donald Trump is right: we need higher taxes on hedge-funders to curb the kind of short-term behavior that harms growth. And we could use smarter laws to encourage Wall Street to behave in a saner manner. Short-term investments and panicked actions only hurt the country. Let’s choose to build for the long term.