November 03, 2021

We do not see the Biden administration slowing down its regulatory policy push. Nor do we see the Biden administration advocating for lower tax rates. All of this suggest to us that the domestic policy initiatives are likely to create an environment of rising regulations and tax rates, a favorable to the small cap. However, in the short run, the Supply Chain disruption appears to be offsetting the effects of expected tax rate and regulation increases. Yet the supply chain disruption shall pass. Markets have a way of solving shortages and disruptions, but politicians have a tough time changing gear. Therefore, as the supply chain constraints ease, we expect the small cap to outperform the large cap stocks.

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