I am not saying it would not affect us
I am just saying this will be least of our issues
US market has 1.5% dividend yield. 20% extra WHt means 0.30% drag on returns for US exposure
But if such a law comes into play, this will reduce confidence of foreign investors in US markets (leading to capital outflows) and hence the drop in stock prices could be more painful than 0.3% tax loss. If you constantly need to worry about getting your money taken away by random laws, you might seek peace of mind rather than 0.30% extra dividend.
Who is to guarantee that capital gains tax wonât come next ?
We need to remember that US market is (was) interesting because itâs open and transparent and have respect to rule of law. If none of this exists, then itâs nothing different than other complicated markets like China. Eventually Return OF capital is more important than Return On Capital.
I really hope rule of law continues to exist once dust settles . I have significant exposure to US myself and I like US companies.
The tax return is limited by your average tax rate, and if you arenât earning many 100K your average tax rate will be a lot lower than the proposed extra ~30% on top of the 15% rate. So youâll lose out on a lot of withholding tax, that canât be credited.
Can you please elaborate or point me to somewhere I can test it myself? Ie how itâd change if one earns 100k, 200k, 300k?
Does she give a reasoning for it?
Edit: my own reasoning for looking to overweigh my US exposure more is that I believe that once the scheisse is over weâll have a US mega bull run, so enduring the next years while accumulating will pay off handsomely.
Many developed countries donât charge any withholding tax. Isnât 15% already bad? Also, arenât there a country we all know that already charges the ridiculously high 35% withholding tax? Actually, that may be the main reason why we arenât at a double-digit percentage of ACWI, who knowsâŠ
Country with less than 10 million (0.1% of world) people and no natural resources is accounting for more than 2% of ACWI. Itâs already a major achievement.
I think Switzerland accounts for a higher market cap per capita than US in ACWI.
Actually it seems for US investor portfolio they were already overweight
But her main comments were about short term & not much will happen because supply chain takes very long time to change and hence practical solutions would be found. So she is not very worried. She also said that US bond yields are rising due to US debt and term premium need to be established back to 1-1.5% levels . This shouldnât be seen as world Mistrust in US
She said for term the risks are unknown and uncertain.
I just understood that this tax is also for bond interest etc and not just for dividends
20% on interest from treasury bills or bonds could be a huge problem for central banks, institutions etc. Because high portion of Bond returns are linked to coupons
okay, Iâm confused, for 20 years: europe large cap=6.3, USA large cap=5.9%. Why is Global ex Switzerland large cap only 4.7%. Are Japan/Canada/Australia and other smaller components pulling down the result that much?
Allianz estimates 10% market sell off, 0.5% yield rise & 5% USD drop if section 899 as approved by US congress becomes a law after Senate approval. Reason being this law gives random power to the US treasury to weaponise capital markets
As per them, market is currently not pricing this section to become a law.
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