Whatās Going On Here?The UK announced plans this week to raise the countryās taxes, as its government tries to survive the morning after the pandemic-fueled night before. What Does This Mean?Governments around the world had to dig deep when the coronavirus outbreak brought their economies to a halt last year, and the UKās was no exception. Now, though, those chickens have come home to roost, and the country has announced plans to raise taxes on its workers. The plan is yet to be approved, but if it is, itāll add up to one of the biggest influxes of tax revenue as a percentage of the countryās economic output in its history. Itād still leave the UK with a lower tax rate than most other advanced economies, mind youā¦ Why Should I Care?For markets: The UK tests the water.
Itās true that tax hikes will bring in some much-needed revenue, but theyāre risky too. The move will leave Brits with less disposable income to spend when theyāre out and about, which could slow down the all-important economic recovery. Other governmentsā eyes, then, will be on how it plays out for the country, especially in Europe ā which has said itāll keep pumping money into its own economy until 2022 ā and in the US. Investors are particularly worried about how any tax hikes could affect the latter, and ā spoilers ā Morgan Stanley and Citibank arenāt optimistic: they just downgraded their outlook for the countryās stocks for the rest of the year (tweet this).
Zooming out: Diamonds arenāt forever.
Less disposable income means less money to spend on lifeās little luxuries, which could spell trouble for De Beers. And the diamond mining and retail company was on such a roll too: it reported on Wednesday that itās on track for its best year since 2016, as stuck-at-home shoppers with money to burn opted to spend it all on a bit of bling. | 