Markus Andrews

More stories

  • 225 Shares149 Views

    in Investing

    This up-and-coming cancer treatment could be a $25 billion market opportunity — it’s already a hotbed for M&A

    Targeted radiopharmaceuticals has caught the eye of big pharma.
    The therapy delivers radiation directly into tumors by attaching a radioactive particle to a targeting molecule.
    RBC Capital Markets sees a $25 billion market opportunity for the space.

    Skynesher | E+ | Getty Images

    Big pharma is betting billions on an up-and-coming class of cancer treatments that some on Wall Street are calling a “massive opportunity.”
    It’s called targeted radiopharmaceutical therapy. It essentially delivers radiation directly into tumors by attaching a radioactive particle to a targeting molecule.

    RBC Capital Markets sees a $25 billion market opportunity for the space.
    “We believe TRT development is still in its early stages, and next-generation technologies that enable improvements in therapeutic potency and address a wider range of cancer targets have the potential to drive value creation in the space,” analyst Gregory Renza, M.D., wrote in a February note.
    Four acquisitions in the space were announced in just the last several months. The latest was by Novartis, which already has two targeted radiotherapies on the market. Pluvicto treats a certain type of advanced prostate cancer, while Lutathera targets neuroendocrine tumors.
    Pluvicto, which faced some now-resolved supply constraints in 2023, is nearing blockbuster status, bringing in $980 million in sales in 2023. By 2028, the two drugs combined are expected to generate $5 billion in revenue, Renza said.

    Stock chart icon

    Novartis’ one-year performance

    A market leader with ‘an aggressive strategy’

    Earlier this month, Novartis said it entered into an agreement to acquire Mariana Oncology for $1 billion. The preclinical-stage company is focused on developing radiopharmaceutical programs, also known as radioligand therapies, that treat breast, prostate and lung cancers. One candidate, known as MC-339, is being researched for small-cell lung cancer.

    “They’re clearly the market leader in this space with an aggressive strategy, both successfully commercializing their products, expanding the market opportunities for those products, and having a pipeline behind that,” said Oppenheimer analyst Jeff Jones. “Acquiring Mariana … gives them even greater discovery capabilities.”
    Shares are up about 1% year to date. The average analyst rating is hold, with 8% upside to the average analyst price target, according to FactSet.

    Read CNBC Pro to learn how to invest this trend:

    Novartis’ success has lit a fire under its competitors. Piper Sandler analyst Edward Tenthoff characterizes it as “FOMO,” or the fear of missing out.
    “I think that’s what’s happening, and big pharma is accumulating capabilities in this new modality,” he said.
    Eli Lilly, which has benefited from the excitement in the GLP-1 space with its diabetes drug Mounjaro and weight-loss treatment Zepbound, completed its $1.4 billion acquisition of radiopharmaceutical company Point Biopharma in December.
    Just before the deal closed, Point Biopharma’s targeted radiation drug, known as PNT2002, met its primary endpoint in a phase three trial for metastatic castration-resistant prostate cancer.
    In addition, earlier this week Eli Lilly announced it will pay Aktis Oncology $60 million to use its novel miniprotein technology platform to generate anticancer radiopharmaceuticals.
    Eli Lilly has an average analyst rating of overweight and 8.3% upside to the average analyst price target, according to FactSet. Shares have already run up nearly 38% so far in 2024.
    “Obviously, investors are very focused on obesity right now, I believe, but we think with their acquisition, they have opportunities certainly on the supply side, which is one of the challenges facing radiopharma companies,” said investor Dan Lyons, a portfolio manager and research analyst at Janus Henderson Investors.
    Bristol-Myers Squibb has also joined the fray, completing its $4.1 billion acquisition of RayzeBio in February. The company now has RayzeBio’s pipeline, including its late-stage targeted radiopharma therapy, RYZ101, for gastroenteropancreatic neuroendocrine tumors. It is also in a phase one trial for small-cell lung cancer.
    The deal’s announcement in December came shortly after Bristol-Myers Squibb said it would spend $14 billion to buy out schizophrenia drug developer Karuna Therapeutics. At the time, William Blair analyst Matt Phipps said the deals show Bristol’s urgency to bring in more products, since some of its older therapies are set to lose their patent protections later this decade.
    Shares of the big pharma company have been on a losing streak, down more than 18% year to date. It has an average analyst rating of hold, according to FactSet.
    Last, in March, AstraZeneca announced plans to purchase clinical-stage biopharmaceutical company Fusion Pharmaceuticals for $2.4 billion. Fusion currently has a phase two clinical trial underway for a potential new treatment, called FPI-2265, for patients with metastatic castration-resistant prostate cancer.

    Stock chart icon

    AstraZeneca’s one-year performance

    AstraZeneca shares have an average analyst rating of overweight and nearly 6% upside to the average analyst price target, according to FactSet.
    “All these companies had manufacturing presence, more or less, built out or are in the process of building out and becoming operational very soon on a commercial scale,” said Jefferies analyst Andrew Tsai. “They’ve got that locked down, and I think that’s, in part, what big pharma wanted.”
    There are also some smaller publicly traded biopharma companies still standing, although not many.
    In addition, there are several private companies in the space that have been attracting private investors, especially of late. Innovative radiopharmaceutical drugs nabbed $518 million in venture financing last year, a whopping 722% increase from the $63 million they received in 2017, according to GlobalData’s Pharma Intelligence Center Deals Database.
    Both those public and private names could be ripe for an acquisition at some point, said Janus Henderson’s Lyons.
    “There are several large pharma companies that don’t yet have radiopharma programs that may be interested in this space,” he said. “In addition, I think some of the players that already have programs will be interested in finding additional targets and pipeline programs to augment their portfolio.”

    ‘Massive opportunity’

    Everyone, including big pharma, is working on either improving on existing treatments or looking to expand into attacking different cancer tumors.
    Novartis, for instance, got FDA approval in April for Lutathera for pediatric patients. It also said last month that it will file for a label expansion for Pluvicto in earlier treatment of prostate cancer.
    “There’s a clear path and strategy by Novartis to expand the market opportunity for those two products,” Jones said.
    Then there are companies that are developing therapies against those same targets. Some, like Bristol’s RayzeBio, are turning to using an alpha emitter such as actinium instead of the beta emitter lutetium used by Pluvicto and Lutathera.
    “These alpha [emitters] have a much stronger punch and are very localized, literally, to a cell length,” said Piper Sandler’s Tenthoff.

    Stock chart icon

    Bristol-Myers Squibb’s one-year performance

    Radiopharmaceuticals are also being looked at to use in conjunction with other treatments, such as immunotherapy.
    Depending on the outcome of current and future clinical trials, the therapy could also eventually be used to treat any cancer, including ovarian, breast or brain, he said.
    “Anywhere where radiation therapy is used, but not necessarily in a targeted approach, makes a lot of sense because these are radiosensitive tumors,” Tenthoff said.
    Companies can also use the decades of research they’ve already done in the field to identify new opportunities, Jones said.
    “You can really leverage all the work we’ve done in cancer over the last 30 to 40 years to identify targets on cancer cells that are not expressed, or much more highly expressed on cancer cells versus normal cells —and really, any of those are an opportunity for targeted radiotherapy,” he said.
    “I see the massive opportunity for targeted radiotherapies,” he added. “We have two products today, two targets and you have essentially the entire universe of cancer research and cancer targeting.” More

  • 125 Shares169 Views

    in Investing

    Op-ed: How activist investors are deactivating with proxy battle losses

    Jeffrey Sonnenfeld, Yale School of Management
    Scott Mlyn | CNBC

    As this year’s proxy season draws to a close, defeat after defeat for activist investors in proxy fights this year – most prominently at Disney and Norfolk Southern – raises the question: Are activist investors increasingly getting de-activated, losing their credibility and power? These self-styled “activist investors” are distinct from the original activists who helped catalyze needed governance reforms two decades back.
    Whether today’s activist investors contribute any genuine economic value is open for debate. Their own track records suggest the answer has been a resounding “no.” We revealed previously during a misguided campaign against Salesforce, that practically every major activist fund dramatically trails the returns of passive stock market indexes such as the S&P 500 and the Dow Jones Industrial Average, over virtually every and any time period while Salesforce’s value soared.

    It is no wonder investors are becoming increasingly wary in allocating toward activist funds, if not withdrawing their money altogether. Assets under management have slid in recent years, reversing a decades-long growth trend.
    Even many activists themselves acknowledge that activism itself will need to evolve to deliver more value, as Nelson Peltz’s son-in-law and former Trian partner Ed Garden said on CNBC in October.

    Today’s activists find themselves under siege on not only their value proposition and credibility, but their entire purpose. Many of today’s activist investors are a far cry from the original, heroic crusaders for shareholder value who pioneered the activism space decades ago. The genuine, original activist investors include Ralph Whitworth of Relational Investors, John Biggs of TIAA, John Bogle of Vanguard, Ira Millstein of Weil Gotshal, as well as Institutional Shareholder Services’ co-founders Nell Minow and Bob Monks. They were at the forefront of a virtuous and necessary movement in corporate governance, bringing accountability, transparency and shareholder value to the forefront while exposing and ending rampant corporate misconduct, cronyism and excess. 
    But over past two decades, the noble mission and language of these genuine investor activists was hijacked by the notorious “greenmailers” of that era – that is, parties that snap up shares and threaten a takeover in a bid to force the company to buy back shares at a higher price. This is why the original activists such as Nell Minow and Harvard’s Stephen Davis so often part ways in many of today’s activist campaigns.
    Today’s activist campaigns will occasionally expose genuine misconduct and mismanagement –  such as Carl Icahn’s campaign against Chesapeake Energy’s Aubrey McClendon, who was ultimately indicted. Far more often, however, activist plans nowadays seem to consist of stripping target companies down to the studs, breaking healthy companies into parts, cutting corners on necessary capex and other short-term financial engineering, all to the long-term detriment of the companies and shareholders they are supposed to be helping.

    No wonder shareholders are rejecting the approach of these profiteering activists, seemingly understanding that they bring more trouble than they are worth. We found that across the last five years at publicly traded companies with a market cap greater than $10 billion dollars, activist investors have substantively lost every single proxy fight they initiated, including at Disney and Norfolk Southern this year, and failed to oust even a single incumbent CEO – despite spending tens if not hundreds of millions of dollars on each fight.
    This streak of defeats for activists in proxy fights has many commentators wondering whether there is even any point to these engagements. As author and former investment banker Bill Cohan wrote in the FT, “I, for one, increasingly have no idea what the point of proxy fights is anymore. They are wildly expensive. They are extremely divisive. They go on for too long. Isn’t it obvious by now that proxy fights have outlived their usefulness?”
    Considering their evident inability to buy victory at the ballot box, more activists are bludgeoning their target companies into preemptive settlements, often highly favorable to the activists short of a change in CEO, including at companies such as Macy’s, Match, Etsy, Alight, JetBlue and Elanco. In fact, more than half of companies defuse proxy fights through negotiated settlements today, whereas only 17% of boards caved into activists in offering preemptive costly settlements 20 years ago. But some argue the pressure activists bring to bear in pushing for settlements amounts to little more than glorified greenmailing under a different name, with activists receiving preferential treatment and cutting the line past far larger shareholders thanks to their bullying.  
    Meanwhile, the credibility of the cottage industry of proxy firms profiteering from the drama of activists’ campaigns is imploding even more than that the activists themselves. Leading business voices such as JPMorgan CEO Jamie Dimon are openly questioning the credibility of proxy advisors such as ISS and Glass Lewis, whose recommendations used to shape many proxy fights: “It is increasingly clear that proxy advisors have undue influence…. many companies would argue that their information is frequently not balanced, not representative of the full view, and not accurate,” wrote Dimon in his shareholder letter this year.
    Indeed, in the highest-profile proxy fights this year, including Disney and Norfolk Southern, proxy advisors overwhelmingly favored the activists over management, but all ended up with egg on their faces when shareholders resoundingly rejected their recommendations. 
    Ironically, these proxy advisors were originally created in the 1980s alongside peer shareholder rights groups such as the Council of Institutional Investors, the United Shareholders Association and the Investor Responsibility Research Center to protect workers and investors from greenmailers. However, since then, these proxy advisory firms have traded hands between a rotating cast of conflicted foreign buyers and private equity firms. ISS alone traded hands over a half-dozen times in the last roughly three decades. One wonders how ISS can be evaluating long-term value for shareholders when their own governance shows that their ownership has a shorter shelf life than a can of tomatoes. 
    Of course, not all activist investors are alike. Some, like Mason Morfit’s ValueAct, prize constructive relations with management and eschew proxy fights, while recognizing that corporate America is surely not free of misconduct, waste and excess. However, given the failing financial performance of many of today’s activist investors, their losing streak in proxy fights and increasing public rejection of their bullying tactics, the credibility and value of activist investors writ large is increasingly imperiled. We must always be on guard for deception and greed masquerading as nobility.
    Jeffrey Sonnenfeld is the Lester Crown Professor in the Practice of Management at Yale University. Steven Tian is the research director at Yale’s Chief Executive Leadership Institute. More

  • 225 Shares159 Views

    in Investing

    Does college still pay? Workers without a degree are doing better than they have in years, report finds

    Increasingly, high school students are questioning the value of college.
    A new Pew Research Center analysis finds that job opportunities and wages are improving for workers without a bachelor’s degree.
    Still, earning a four-year degree is almost always worthwhile, other research shows.

    Outcomes for workers without a degree are improving

    In fact, young adults without a college degree are doing better than they have in years, according to Pew’s analysis of government data.
    Their earnings mostly trended lower since the mid-1970s, largely due to increased automation and a shift away from manufacturing and unionization. Then things turned a corner roughly a decade ago, when unemployment fell nationwide and opportunities increased for workers between the ages of 25 and 34, according to Fry.

    “Labor markets have been really tight, and this has particularly benefited less-educated workers,” he said.
    Since then, circumstances — and earnings — have continued to rise for workers with just a high school diploma or some college. Today, “they are clearly better off than they were 10 years ago,” Fry said.

    Improving job opportunities for “new-collar” workers without a degree continues to drive more students away from college. “The societal choice presented to these would-be students — earn ‘decent money’ now or invest in a degree — is still heavily colored by labor shortages,” said Hafeez Lakhani, founder and president of Lakhani Coaching in New York.

    There’s still a ‘wage premium’ for college grads

    However, earnings for young adults with a bachelor’s degree have also trended up over the same time period, leaving the so-called “college wage premium” intact, Pew found.
    According to the New York Fed’s latest reading, annual wages for recent college graduates — those between the ages of 22 and 27 — are 67% higher than for those with just a high school diploma.
    “The rewards of getting a bachelor’s degree have not deteriorated,” Fry said.

    College is worth it, studies show

    Getting a diploma is almost always worth it in the long run, many reports show.
    Bachelor’s degree holders generally earn 75% more than those with just a high school diploma — and the higher the level of educational attainment, the larger the payoff, according to “The College Payoff,” a report from the Georgetown University Center on Education and the Workforce.
    Finishing college puts workers on track to earn a median of $2.8 million over their lifetimes, compared with $1.6 million if they only had a high school diploma, Georgetown’s report found. 

    Adults with at least a bachelor’s degree report higher financial well-being than adults with lower levels of education, according to a Federal Reserve study on economic well-being of U.S. households. College graduates are also more likely to report receiving a raise and benefiting from more hybrid or remote work opportunities than workers at other education levels.

    ‘I have more students than I have seats’

    Still, the rising cost of college and ballooning student loan balances have played a large role in changing views about higher education. 
    More than half, or 53%, of high school students are open to an alternative path, and nearly 60% believe they can be successful without a degree, according to a study by ECMC Group.
    At Virginia’s Fairfax County Public Schools Adult and Community Education, which focuses on career and technical training, “I have more students than I have seats,” said Paul Steiner, the program’s administrator.

    And yet “there is still a little bit of apprehension in terms of students who want to pursue skilled trades,” Steiner said.
    In part, there is a bias against vocational school that has been difficult to overcome, he said, “especially if mom and dad went to college.”
    “That being said, more students are thinking twice about the opportunities that are available through an apprenticeship or career training focused on credentialing versus a four-year path that would require student debt,” Steiner said.
    Subscribe to CNBC on YouTube. More

  • 200 Shares99 Views

    in News

    Artificial intelligence, great wealth transfer: Why this financial analyst sees a rosy time ahead for stocks

    FA Playbook

    Financial analyst Tom Lee sees a rosy time ahead for stocks, thanks to the innovation of artificial intelligence and a massive incoming wealth transfer to millennials.
    As a result, Lee said: “We think the earnings power is much better than people realized.”

    Longhua Liao | Moment | Getty Images

    Some investors may worry about market volatility ahead, given a contentious presidential race, lingering inflation, sinking consumer sentiment and uncertainty over Federal Reserve interest rate cuts.
    Financial analyst Tom Lee has a more optimistic outlook.

    “Since Covid, companies went through a huge stress test, and they showed that they are really good at adjusting to inflation shocks, supply shocks, economy shutdown,” said Lee, managing partner and head of research at Fundstrat Global Advisors.
    He spoke on Wednesday at the CNBC Financial Advisors Summit.
    As a result, he said: “We think the earnings power is much better than people realized.”
    Even as inflation cools, many companies will benefit, Lee said. (Higher prices are usually considered a good thing for businesses.)
    “A lot of companies have an inverse correlation to inflation,” he said. “A great example is technology is inversely correlated to inflation, so their margins actually go up if inflation is falling.”

    More from FA Playbook:

    Here’s a look at other stories impacting the financial advisor business.

    As for concerns that the Federal Reserve could trigger a recession if it lowers interest rates prematurely? Lee doesn’t see that happening.
    “We’ve been more optimistic that they’re going to achieve their idea of a soft landing,” he said.

    AI’s payoff

    Lee said his firm has studied what drives innovation cycles in America. In the two biggest previous periods — in the 1940s and 1950s, and then again in the 1990s — there was a global labor shortage.
    “There was a lot of pressure on either wages or ways to innovate to produce more output,” Lee said.
    “We’ve gone into a period of structural deficit of prime force labor, which is going to last until 2045, which means another tech cycle, I think, is underway.”
    Lee estimates that the worker shortage will leave companies with an extra $3 trillion a year that they would have otherwise spent on wages.
    “To us, this is really early stages for the amount of money that will be spent on generative AI,” said Lee, pointing to profits already seen by companies like Nvidia.

    A $90 trillion wealth transfer

    Another reason Lee sees a rosy time ahead for stocks: Over the next 20 years, millennials are set to inherit as much as $90 trillion from the baby boomer generation, by some estimates.
    “[It’s] one of the largest wealth transfers ever in history, it’s more net worth than the entire net worth of China,” Lee said.
    The so-called great wealth transfer could lead certain stocks to rise dramatically, he said.
    “Many surveys we saw even five years ago showed young people trust technology companies more than governments, which means they’re going to support tech and innovation,” Lee said.

    A word of caution

    Despite all-time highs for stocks, clients are often best sticking to their long-term strategies,  said Douglas Boneparth, a certified financial planner, president and founder of Bone Fide Wealth, a wealth management firm based in New York City.
    “Disciplined investors have been rewarded throughout 2023 and into 2024,” said Boneparth,  a member of the CNBC Financial Advisor Council.
    That not only means not selling in a panic during inevitable dips, but also keeping some assets at a healthy distance from the market even during the good times.
    “I remind our clients that maintaining a robust cash reserve is important to help navigate volatility, protect against emergencies [and to] take advantage of any opportunities,” Boneparth said.

    Don’t miss these exclusives from CNBC PRO More

  • 200 Shares129 Views

    in News

    As S&P 500 reaches fresh highs, experts say generative artificial intelligence will create new investment opportunities

    FA Playbook

    The S&P 500 had a record close on Tuesday.
    While some investors may fear a pullback, experts say it would be wise to watch for companies that are ahead with adopting generative artificial intelligence.

    People walk outside of the New York Stock Exchange in New York City on July 25, 2022.
    Spencer Platt | Getty Images

    The S&P 500 climbed to yet another record close on Tuesday.
    The index, which tracks the performance of about 500 of the largest U.S. company stocks, has jumped 53% since inflation peaked in 2022, experts noted during the CNBC Financial Advisor Summit on Wednesday.

    While that may prompt fears that a pullback is on the horizon, stocks may have more room to run.
    “I absolutely feel better about equities than I have since … the financial crisis,” said Savita Subramanian, head of U.S. equity strategy and quantitative strategy at Bank of America.

    More from FA Playbook:

    Here’s a look at other stories impacting the financial advisor business.

    Today, companies have adapted to a high inflation environment while workers are seeing positive real wage growth, Subramanian said. Admittedly, there are drawbacks including the wealth divide, income gap and protectionist inklings in the U.S.
    “But I don’t necessarily think those are negative for the market,” Subramanian said. “I think those are actually very positive for the S&P 500.”
    The strong runup may prompt even financial advisors to be fearful about allocating fresh capital, said Tim Seymour, founder and chief investment officer at Seymour Asset Management.

    Many investors are tempted to stay in cash because “they just feel comfortable there,” according to Courtney Garcia, a certified financial planner and senior wealth advisor at Payne Capital Management.
    But while up to 5% guaranteed returns on cash may feel great, it is not necessarily keeping pace with inflation, said Garcia. That’s a caution she explains to clients, she said.
    Investors still may find new opportunities to invest in stocks, experts said during a session at the summit.

    Generative AI is a ‘game changer’

    In 10 years or less, S&P 500 index companies will likely become more efficient and labor light, due to the effects of generative artificial intelligence, Subramanian said.
    “Generative AI is a game changer,” Subramanian said. “And what that can do for industries is profound.”
    Call centers have already been disrupted by AI, and other areas such as financial services, legal services and Hollywood still stand to benefit, she said.

    In the 1980s and 1990s, a similar productivity and efficiency story played out with the personal computer revolution, which prompted more automation across industries.
    Some companies will be poised to figure out how to use generative AI tools correctly first, which will lead their margins to expand and boost their overall multiples, according to Subramanian.
    “What you want to do is figure out which management teams are going to harness the strength and the power of a lot of these new tools and do it first and do it well,” Subramanian said.

    It’s a ‘real stock pickers’ market’

    The “Magnificent Seven” companies — Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta Platforms — will continue to dominate in terms of growth, Seymour said.
    But opportunities in health care, industrials, energy and utilities are cheap. International exposure should not be ignored, he said.
    Each of the companies in the Magnificent Seven has different drivers, advantages and threats, Subramanian noted. That is how investors should be thinking about the entire S&P 500, she said.
     “Where we are today is a real stock pickers’ market,” Subramanian said. More

  • 100 Shares179 Views

    in Investing

    IRS extends Free File tax program through 2029

    The IRS has extended the Free File program through 2029, continuing its partnership with a coalition of private tax software companies.
    IRS Free File remains open for 2023 returns through the Oct. 15 federal tax extension deadline.
    Meanwhile, the IRS is weighing future plans for Direct File, a free filing pilot directly with the agency.

    D3sign | Moment | Getty Images

    The IRS has extended the Free File program through 2029, continuing its partnership with a coalition of private tax software companies that allow most Americans to file federal taxes for free.
    This season, Free File processed 2.9 million returns through May 11, a 7.3% increase compared to the same period last year, according to the IRS.

    “Free File has been an important partner with the IRS for more than two decades and helped tens of millions of taxpayers,” Ken Corbin, chief of IRS taxpayer services, said in a statement Wednesday. “This extension will continue that relationship into the future.”
    More from Personal Finance:IRS free tax filing pilot processed 140,000 returns, saved $5.6 million in feesBiden, Trump rematch: How the presidential election may disrupt the stock marketThe decision to sell your home vs. rent it out is ‘complicated,’ experts say
    “This multi-year agreement will also provide certainty for private-sector partners to help with their future Free File planning,” Corbin added.
    IRS Free File remains open through the Oct. 15 federal tax extension deadline.
    You can use Free File for 2023 returns with an adjusted gross income of $79,000 or less, which is up from $73,000 in 2022. Fillable Forms are also still available for all income levels.  

    The future of IRS Direct File

    The news comes roughly one month after the agency unveiled numbers for its Direct File pilot program, which provided a free filing option directly with the IRS for certain taxpayers in 12 states.
    More than 140,000 taxpayers successfully filed returns using IRS Direct File this tax season, and the program saved filers an estimated $5.6 million in tax preparation fees for federal returns.
    The agency expects to decide on the future of Direct File later this spring after input from a “wide variety of stakeholders,” IRS Commissioner Danny Werfel told reporters on a press call in April.

    Don’t miss these exclusives from CNBC PRO More

  • 163 Shares169 Views

    in News

    Here’s how higher state taxes on the wealthy could affect interstate migration trends

    YOUR GUIDE TO NAVIGATING YOUR FINANCIAL FUTURE

    There’s a growing debate over how higher taxes on the wealthy affect interstate migration trends, and some experts say millionaire tax flight is underway.
    “Taxes are an important part of this puzzle,” said Jared Walczak, vice president of state projects for the Tax Foundation, speaking at CNBC’s Financial Advisor Summit on Wednesday.

    Sean De Burca | The Image Bank | Getty Images

    There’s a growing debate over how higher taxes on the wealthy affect interstate migration trends — and some experts say millionaire tax flight is underway.
    “Taxes are an important part of this puzzle,” said Jared Walczak, vice president of state projects for the Tax Foundation, speaking at CNBC’s Financial Advisor Summit on Wednesday.

    “There’s more movement among the highest-income and highest-net-worth individuals than there is among the lowest,” Walczak said. He said studies show there’s an out-migration when states make these changes.

    More from Your Money:

    Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

    “Tax policy is having an impact,” said Bess Freedman, CEO of Brown Harris Stevens Residential Sales, who also spoke on CNBC’s panel. But it’s not “earth-shaking” or the “end of the world for New York,” a city that still has more than 350,000 millionaires, she said. 
    “People still want to be a part of New York and are willing to invest,” she added.
    Other research suggests state taxes may have a minimal impact on migration trends, according to Michael Mazerov, senior fellow at the Center on Budget and Policy Priorities.
    Top earners are more likely to leave certain high-tax states, but there’s no evidence to suggest a “mass exodus” from places like New York, said Mazerov, who released a report on this topic in August 2023.

    Tax changes on the horizon

    TCJA also added a temporary $10,000 cap on the deduction for state and local taxes, known as SALT, which has been a key issue in high-tax states such as California, New Jersey and New York. The limit was designed to raise tax revenue for other TCJA provisions.
    Walczak said the $10,000 SALT deduction limit has contributed to migration. “It’s worth a couple of percentage points in a state like New York,” he said.
    However, with control of the White House and Congress pending, it’s difficult to predict whether the SALT cap will lift after 2025, especially amid the federal budget deficit. More

  • 163 Shares199 Views

    in News

    Biden, Trump rematch: Here’s how the presidential election may disrupt the stock market

    FA Playbook

    Speaking at CNBC’s Financial Advisor Summit, politics experts covered what investors should know about the stock market during the 2024 presidential election.
    “Given this is going down in history as probably the most consequential and contentious election in the U.S. in 100 years, it’s kind of difficult to believe that the market is trading with the election in mind,” said David Woo, CEO of research firm Unbound.
    Historically, potential election outcomes have a minimal impact on financial market performance in the medium and long term, according to a U.S. Bank Wealth Management analysis.

    Joe Biden and Donald Trump 2024.
    Brendan Smialowski | Jon Cherry | Getty Images

    The stock market has yet to price in a potential outcome in the presidential election, a rematch between President Joe Biden and former President Donald Trump.
    In general, election years are not great for the stock market leading up to voting day, David Woo, CEO of research firm Unbound, said Wednesday in a session during CNBC’s Financial Advisor Summit.

    But this year is an exception, Woo explained.
    “This year we’re up 12% so far. This is the best-performing year for the S&P 500 [in] an election year since [the] 1980 election,” Woo said.
    Looking back to 1928, the S&P 500 returned an average 7.5% in presidential election years, versus an average 8% in non-election years, according to a March analysis from J.P. Morgan Private Bank.
    “Given this is going down in history as probably the most consequential and contentious election in the U.S. in 100 years, it’s kind of difficult to believe that the market is trading with the election in mind,” Woo said.

    What Biden, Trump could mean for the stock market

    While domestic issues are usually determinative in presidential elections, the coming race will likely be focused on international issues, said Woo.

    Both candidates will enter office with a budget deficit of $1 trillion, meaning “whoever is going to be the next president is going to be facing a real serious constraint,” said Woo. “When it comes to fiscal policy, frankly speaking, I don’t think there will be a huge difference.”

    More from FA Playbook:

    Here’s a look at other stories impacting the financial advisor business.

    Instead, the differentiator will depend on the candidate’s stance on foreign policy, he said.
    Defense spending might increase under a Biden administration, signaling a potential boost for defense stocks, Woo said.
    Meanwhile, emerging markets “may be more bullish” under a Trump administration, he said.
    “I think Trump is going to come back with a more transactional approach in dealing with American adversaries,” said Woo, who believes the Republican candidate us going to revisit the Phase 1 Trade agreement between China and Russia as the “starting point” of any negotiation deal between the U.S. and China.
    Elsewhere, energy stocks might benefit under Biden more so than Trump.
    “Everybody thinks Donald Trump is going to be bullish for energy … that’s completely untrue,” Woo said.
    “It was actually not until Biden became president and energy stocks soared because geopolitical risks went through the roof,” he said.
    Meanwhile, all polls are pointing toward a Trump reelection, Steve Kornacki, National Political Correspondent at NBC News and MSNBC, said during the summit.
    “Donald Trump in the average is leading Biden by 1.1 points nationally,” he said, as Trump has made gains among Hispanic and African American voters, as well as younger, nonwhite voters.
    “That accounts for why Donald Trump is polling better now than he did four years ago,” he said.

    When the market gets volatile during elections

    Historically, potential election outcomes have a minimal impact on financial market performance in the medium and long term, according to an analysis by investment strategists at U.S. Bank Wealth Management. They studied market data from the past 75 years and identified patterns that repeated themselves during election cycles. 
    Yet delays in verifying an election winner have negatively affected riskier asset classes in prior races, according to the analysis.
    “The stock market does not like uncertainty whatsoever,” said Douglas A. Boneparth, a certified financial planner, president and founder of Bone Fide Wealth, a wealth management firm based in New York City.

    If things are delayed and there’s not a “clear-cut winner,” that uncertainty can lead to market volatility, he said. “But it’s very hard to predict what the market is going to do based on simply who’s going to get elected.” 
    Overall, the stock market has done well under both presidents, said Boneparth: “No one’s crying over how well the market has done in either administration.” 

    ‘You’re probably going to make a mistake’

    “As financial advisors, we don’t really make decisions around politics, let alone who’s going to be elected president,” said Boneparth, a member of the CNBC Financial Advisor Council.
    Therefore, it’s in your best interest to stick to your long-term strategy, said Boneparth.
    “If you’re making any changes specifically because of one candidate or the other, you’re probably going to make a mistake,” he said. “If you’re going to let this disrupt your long-term strategy, what else are you going to let disrupt your long-term strategy?”

    Don’t miss these exclusives from CNBC PRO More