The stock market falls due to Biden’s capital gain tax proposals

The U.S. market has had a roller-coaster experience in the last five weeks following President Joe Biden’s capital gain tax proposals for the wealthy and largest corporations.

After Bloomberg reported that individuals earning $1 million or more will see an increase in their taxes, the S&P turned lower. The new top rate, together with an existing surtax on investment income could increase federal tax rates for rich individuals to as high 43.3%. Capital gains taxes are charged on the profits corporations or individuals make from investments in stock and other assets. There have been speculations that some investors may sell shares before the change is made.

“Sticker shock over some of these tax figures will be hard to shake off for some investors,” said Edward Moya, senior market analyst at Oanda. “Some traders are looking for an excuse to lock in profits they might choose to use this tax story as their catalyst.

The index and Nasdaq Composite fell 0.9 percent on Thursday, according to reports from The New York Times. They gave up earlier gains after Bloomberg’s headline of capital gains tax increase.

A win for renewable energy companies

On the other hand, shares in renewable energy companies rose in Thursday, following President Biden’s two-day climate summit, where he announced that the United States intends to cut greenhouse gas emissions in half by the end of 2029.

Other governments have also set climate change targets. Britain, on Tuesday said it set a new target of cutting gas emissions by 80% by 2035. The European Union on Wednesday agreed to reduce net emissions by at least 55% by the end of the decade.

“As governments around the world look to kick-start their recoveries as well as reach climate goals, green spending has become one avenue for doing so,” UBS Global Wealth Management strategists wrote in a note. “We think sustainable investment universe will continue to expand rapidly.”

Shares of Danish wind energy company, Orsted rose 6.1% on Thursday, ending an 8-day streak of losses. Shares of Siemens Gamesa Renewable Energy rose 6.7%, as well.

In the United States shares of First Solar jumped 4.2%, while SunPower rose 1%, from Wednesday’s gains. The iShares Global Clean Energy exchange-traded fund gained 2.4%.