Kingsview CIO Scott Martin discusses what an unwinding of the tax environment might mean as the economy reopens.

Program: Cavuto Coast to Coast
Date: 3/31/2021
Station: Fox Business News
Time: 12:00PM

NEIL CAVUTO: I want to go to D.R Barton on all of this, Scott Martin on all of this, D.R, it’s obviously what we’re trying to get back in the groove. Disney talking about expanding openings at Disneyland, Disney World, Universal Studios looking to get at least a partial reopening next month. You know, Broadway talking about shows resuming this fall. You know the drill more and more getting back to normal. And that might be behind a lot of the market advance. What do you think?

DR BARTON: Now, I think that’s a really a really strong reason, Neil, we’re seeing things over not just in the big states that have opened up, but you know that we’ve talked about Florida, Texas, but other states that are also seeing some uptick in restaurant revenues, in in tourism. So those things are starting to see that uptick. That was the thing we really needed to start flipping this thing was some of the businesses that were lagging to start picking up. And I think that’s what we’re seeing. Vaccines are working. It’s coming through pretty well right now.

CAVUTO: You know, Scott Martin, I want to echo something that Larry Kudlow was saying in the prior segment about the market’s behavior in the face of what’s going to be a lot of hikes in taxes for a lot of folks, not just rich folks, that maybe the markets are saying a lot of it’s not going to happen. What do you think of that, that because if the markets truly absorb the nature of all of the spending and the tax hikes to go with it, you could make a compelling argument that shouldn’t be happening. But what do you make of that, that this is the market’s way of saying some of this gets through, not all of it gets through. Do you buy that?

SCOTT MARTIN: Feels like a dangerous game to play, Neil, because we’ve been in such a conducive tax environment thanks to Donald Trump for the last several years. And it looks like there’s a general unwinding of that likely to happen one way or another. And I think anything that unwinds is going to be somewhat detrimental. And my concern and I agree with DR, I think this opening in this hope and the vaccination effectiveness certainly ramps up the markets into, let’s just say, Q3 or Q4 of this year. But then we stand around at that point and maybe it’s sitting around a fire talking or whatever we’re doing. And it’s like now what you know, now the economy is open. Now everybody’s supposed to be back to work. Now we’re supposed to go back to our jobs in these downtown urban areas. And we’ve done such damage to society, both kind of physically and I guess psychologically, that maybe some of that stuff doesn’t come back as fast. And so that’s when I think, to your point, the tax hikes kick in the jawboning with the two thousand twenty-two midterm elections come in and all the uncertainty and the fallout for paying for all these crazy stimulus packages, some of which we didn’t need, start to really take hold on the market and knock it down again.

CAVUTO: You know DR, talked to a number of prominent Democrats and Congressman Garamendi among them, that there is a long history of Republicans saying when taxes go up, stocks go down. But they went up, they say, during the Clinton administration hike the top rate for individuals. Now, he had lowered a lot of investment related taxes, but they went up from a really super meltdown lows. And the Obama administration when he, too, later raised the top rate. So, their argument is that that dog don’t hunt that argument, that in the face of higher taxes, the market suffered. It’s not borne out. What do you think of that?

BARTON: Well, I think that it’s very simple that we need to teach those folks that are saying that that correlation does not equal causation, if we look at both of those cases to anecdotal cases, those were coming off of all that really generational market lows. We had the huge market lows coming off of the dot.com blow up and 9/11. And then we had the twenty-seven twenty-eight real estate blow up and we recovered after those. Wow, what a surprise. So, I can’t think we would say raising taxes helped those. And I believe that a tax raise here that we’re looking at, I think I’m I’m a little bit different from Scott. I think it’s going to be tough to keep them away completely. And I am with him in that when it comes, the markets aren’t going to like it very much. And we’re going to have to see how that plays out. Tax tax hikes versus all the stimulus we’ve been getting. Who wins that little punching, punching war?

CAVUTO: All right, we’re going to spend a little bit more when I get you guys back.