Because the tax reduction favors investment

The tax cut has much more to do with equities than you might initially imagine. To the point that any movement in this direction will affect financial markets and very specifically in the stock market. Not only in Spain, but throughout the industrialized world. Because in effect, the relationship between tax treatment and investment it is much more intimate than many believe. To the point that it can help you make money or, on the contrary, lose them. With very fast movements in the stock markets.

So that you have a little more idea about what you have to do in these scenarios, it will be completely necessary that you understand the interrelation between both concepts from now on. Because in this way, you will be in a better position to ensure that the capital gains appear in your income statement. In addition, it will become a powerful incentive to open positions in equities based on this important economic variable. You will only have to do something on your part so that in this way the results begin to reach your portfolio.

Because a very strong taxation scenario is not the same as relaxed. Its effects on equities will be completely different, as you will be able to see below. It is something simple to understand and is available to everyone, including small and medium investors. With disparate effects, depending on whether you are in one situation or another. Because simply you will have disparate treatmentsbut completely different. It is, in short, another way of understanding the stock market. From a different point of view and very practical to defend your interests as a retail investor.

How does the tax treatment affect?

The first thing you should know is that a relaxed fiscal policy benefits investors. This is so because by having more liquidity in their savings accounts, they will have more options to allocate this money to investments. Whatever financial product they choose at each specific moment. It is clear that your investment wishes will be heightened more than the bill. Examples in recent years testify and ratify these movements in the flow of capital. Nor can you forget at any time you will notice greater pressure to formalize operations on the stock market.

Governments, when they can make tax cuts so that their citizens have more money in their checking accounts. Thus, it is much easier for them to lean towards any kind of investment. Well in variable income, in fixed income or even from alternative models. Not in vain, they want to give a greater return on their savings. Much more than in completely opposite scenarios, where the adjustment to the domestic budget is always much greater.

In addition, it is a classic way of stimulating the economy of a country or geographic area. It is in all the manuals of the great economists. Although due to the consequences of the last economic recession, this scenario so long awaited by savers could not be applied in Spain. If not rather the opposite, the tax rate has been raised of the main national and local rates. In this way, there is less money in the pocket of taxpayers and their chances of entering equities are significantly lower. It is another way of understanding the stock market and from the angle of taxation.

Trump cuts taxes in the USA

To illustrate this situation that has to do with tax treatment, there is nothing better than going to an extremely topical topic. And it is the one that has to do with the situation in the United States after the arrival of the controversial Donald Trump to the presidency of this world economic power. Well, one of his most important electoral promises was based on the drastic tax reduction. And so it has been after making his last decisions. That will undoubtedly affect your equity markets.

Because in effect, the president had anticipated a "historic cut" in taxes on corporations and the American middle class. Specifically, he promised in his election campaign to push for a reduction in the tax rate of corporations from 35 to 15 percent, a 20 percentage point cut. This has been effective in the previous weeks. As a consequence of this important measure, Americans will have more money in their wallets.

One of the effects of this fact is that they will be much more likely to open positions in the stock market. It seems logical, therefore, that more money reaches the stock markets of this country. With a foreseeable rises of the same. To the point that a new upward pull could be generated in these financial markets. For a very simple reason to explain and that is none other than the buying positions are imposed on the sellers. From this perspective, it is not a bad idea to divert the savings of Spanish families to this international market. Because it can generate greater profitability than in the squares of the old continent.

High taxes: opposite effects

Another very different thing is the opposite scenario. When too much money is paid in taxes. This situation makes potential investors more reluctant. Because they have less money in their checking account. As a result, the number of operations carried out in the financial markets will be less. Among other reasons, because they must attend to their personal and family expenses. Not in vain, you will have to adjust with greater discipline to their budgets due to having less liquidity.

Expansive tax treatments always pose an added problem to equities. Because it drives away a good number of small and medium investors from it. It is therefore not the best situation for you to get in touch with the always complicated world of money, but rather the opposite. The historical periods in which it has happened have been the least favorable for an increase in the share price to have been generated. At least in the short term.

What can you do in these cases?

If you find yourself immersed in another situation, you will have no choice but to opt for substantially different investment strategies. Although in all cases there will be some common denominators with which you must comply. To start from the following lines of action that we expose you below.

• You must define what is one or the other period, because depending on them, you will have no other solution than make different decisions. In some cases to open positions and in others for the opposite. That is, make partial or total sales.
• You can always take advantage of fiscal relaxation spaces because the available capital will be greater in the financial markets. With a presumable imposition of the buying positions on the sellers.
• Low taxes is one invitation to optimism so that the bags can rise, even with great force. You can go to markets where relaxation or tax treatment will undoubtedly be much more beneficial to the interests of taxpayers.
• The tax increase is not only unfavorable to relate to the world of money. But it influences with great decision on the expenses you will have in investments formalized with capital gains. Both in the liquidation of operations, as in the declaration of income.
• This aspect influences more aggressive values than in those that are constituted as refuge values. That is, those with which you are in the best position to make a stable savings bag for the medium and long term. It is a small detail that can affect your open positions in the equity markets.
• The liquidity you have to open positions in the financial markets. To the point that you can risk in regards to the amounts that you can dedicate to this financial asset that is formalized in the stock market.
• As you can figure out in these cases, it will be a measure that will help you boost your investments. Not in a spectacular way, but rather limited in its effects. But that will serve to arrive at the end of the year with a greater positioning in the selected markets.

Conclusions on the tax treatment

In summary, you cannot forget that it is a scenario in which you will always benefit. From many points of view: performance, operating, commissions and even with a broader wealth than expected. You should take advantage of it to the extent that you can and analyzed all the strategies you have to make your savings profitable.

This does not mean that the stock markets remain in an uptrend for a long time. But on the contrary, it will depend on other variables that are much more relevant for all exchanges. Only if both coincide will it be a added incentive so that you increase your positions in these markets. At the levels that you consider most appropriate to protect your interests as a small and medium investor. Because in effect, different scenarios can be considered and some of them very interesting to achieve your goals.

Lastly, not only are relaxation tax treatments for your investment right. But to formalize any type of banking product (term deposits, promissory notes or public debt, among the most relevant).