What Historic UK Tax Cuts Mean For The Markets: 'Material Increase In Risks'

Zinger Key Points
  • British stocks tanked on Friday after the U.K. government unveiled a massive stimulus program.
  • Experts say the new tax and investment policies significantly ramp up U.K. economic risks.
What Historic UK Tax Cuts Mean For The Markets: 'Material Increase In Risks'

The iShares MSCI United Kingdom ETF EWU plummeted 5.3% on Friday after investors were not impressed by an aggressive series of tax cuts unveiled by the new U.K. government.

What Happened? On Friday, new U.K. Prime Minister Liz Truss announced a bold new stimulus program that includes tax cuts and investment incentives. The U.K. government is planning to cancel a planned corporate tax rate hike, reverse a recent increase in the income tax and cut taxes for certain businesses in designated investment zones.

Related Link: Federal Reserve Issues Third Straight 0.75% Interest Rate Hike: What It Means For The Struggling Stock Market

The new stimulus program comes after the Bank of England said Thursday that the U.K. economy is likely already in a recession.

Why It's Important: U.K. Finance Minister Kwasi Kwarteng said Friday that the series of economic measures are part of the U.K.'s new focus on growth, which includes a target for medium-term economic growth of 2.5%.

Related Link: Is Putin Bluffing? How Stocks Are Reacting On Heels Of Thinly-Veiled Nuke Threats

Here's an overview of all the potential changes:

  • The U.K. corporate tax rate will remain at 19% instead of rising to 25%. The 19% rate is the lowest among G-20 nations.
  • The recent 1.25% tax hike on National Insurance contributions will be reversed.
  • The basic rate of income tax will be cut from 20 pence to 19 pence.
  • The top income tax rate for earners making more than $166,770 will be cut from 45% to 40%.
  • Stamp duty, a tax paid on home purchases, will be cut.
  • The U.K. will create investment zones that will offer businesses special tax incentives, liberalized planning rules and reduced regulatory obstacles to encourage investing.
  • A planned tax hike on alcohol will be eliminated.
  • A cap on banker bonuses will be eliminated.
  • The U.K. will create a refund system for sales tax paid by foreign visitors.

Following the news, the British pound dropped to a 37-year low against the U.S. dollar. Investors also dumped U.K. government bonds, as investors appear concerned about the massive scale of the stimulus program and what it means about the current state of the U.K. economy.

On Friday, Bank of America economist Robert Wood said the new U.K. fiscal package represents the third major U.K. fiscal shock of the past 15 years and significantly ramps up the risk for U.K. investors.

"In short, in our view today’s package represents a material increase in risks: to inflation; to Bank Rate; and to the currency," Wood said.

Benzinga's Take: Even after Friday's big sell-off, the EWU ETF is only down 21% year-to-date in 2022, slightly better than the 23% decline for the SPDR S&P 500 ETF Trust SPY. However, the longer-term picture tells an entirely different story about the U.K. economy and the impact of the Brexit decision and its fallout. In the past 10 years, the SPY ETF is up 150.7% overall, while the EWU ETF is down 26.3% in that time.

Posted In: Bank of AmericaKwasi KwartengLiz TrussRobert WoodAnalyst ColorEurozonePoliticsMarketsAnalyst RatingsGeneral

11 Best Black Friday Deals on Amazon

11 Best Black Friday Deals on Amazon

The best Black Friday deals from Amazon are still coming hard and fast because the holiday is not yet upon us and the mega-retailer prefers to keep consumers on the hook for as long as possible—spending as much money as possible. 

To that end, here are some of the best Black Friday deals from Amazon that you might want to consider today.

Calphalon 10-Piece Pots and Pans Set

Regular Price: $172

Sale Price: $138.88

Calphalon’s 10-Piece Pots and Pans Set is designed with stainless steel, stay-cool handles along with pour spouts. The nonstick surface is PFOA-free and built with hard-anodized aluminum that is both durable and conducts heat extremely well. The set includes 2 fry pans, a sauce pan with cover, saute pan with cover and large stock pot with cover.

Apple AirPods 2nd Generation

Regular Price: $144

Sale Price: $85.49

The 2nd Generation AirPods from Apple connect to all Apple devices and give you an enhanced listening experience. Plus, they come with a case that keeps them safe and allows you to charge them in a secure environment. With over 24 hours of battery life, access to Siri and easy setup, you can start listening to your favorite tunes or podcasts today.

Adidas Ultraboost 21 Running Shoes

Regular Price: $129.98

Sale Price: $89.98

The Adidas Women’s Ultraboost 21 running shoe is perfect for anyone who likes a short run, maybe a 5K, half marathon or more. Coming in several colors and styles, you can slip these shoes on, enjoy the cushioned outsole, sink into the supple insole and secure laces.

Ninja AF101 Air Fryer

Regular Price: $129.99

Sale Price: $97.83

The Ninja AF101 Air Fryer allows you to crisp, roast, reheat and even dehydrate food products faster and cheaper than ever before. It has a 4-quart capacity and offers a wide temperature range along with several time settings so that you can customize each dish to your needs. Plus, all the parts are dishwasher safe.

Beats Solo3 Wireless On-Ear Headphones

Regular Price: $199.95

Sale Price: $99

Beats by Dr. Dre are among the best headphones on the market, and the Solo3 Wireless On-Ear Headphones include the Apple W1 chip, Class 1 Bluetooth and 40 hours of battery time. These headphones even have a built-in microphone and offer an adjustable fit so that you can be comfortable whether you’re listening to an Android or iOS device.

Hoover Power Scrub Deluxe Carpet Cleaner

Regular Price: $198.98

Sale Price: $175.98

The Hoover Power Scrub Deluxe Carpet Cleaner allows you to keep your home spotless and clean up after your pets. The cleaner comes with the Hoover Paws and Claws Deep shampoo and a storage mat to keep the floor dry once it’s put away.

LG CordZero Auto Empty Cordless Stick Vacuum

Regular Price: $999.00

Sale Price: $851.71

The LG CordZero Auto Empty Cordless Stick Vacuum and Wet Mop All in One Tower is designed to work in homes with several pets or children and clean up all the messes that life brings. The battery lasts up to 2 hours, and there’s an extra removable battery that gives you even more cleaning time and power.

Breville Fresh and Furious Blender

Regular Price: $278.60

Sale Price: $199.95

Breville, a top name in blenders and juicers, offers the Fresh and Furious Blender, featuring 50-ounce capacity, Vac Q technology, pre-programmed cycles, LCD display and lid with pull ring. With the Fresh and Furious Blender, you can make everything from a smoothie to a soup and everything in between.

Hot Tools Professional 2000 Turbo Ionic Hair Dryer

Regular Price: $89.99

Sale Price: $55.63

The Hot Tools Professional 2000 Turbo Ionic Hair Dryer is designed for professional use, but it works perfectly in the home. With 1875 watts of power, 6 heat and speed settings and a lightweight design, you can easily style your hair and utilize the diffuser, cut back on the frizz and stretch the 8 ft cord for maximum functionality.

Columbia Heavenly Long Hooded Jacket

Regular Price: $160

Sale Price: $97.38

The Heavenly Long Hooded Jacket from Columbia is designed to be light for everyday use, but it’s heavy enough to protect you from the cold. The plush fleece lining, security pocket, water resistant fabric, 2-way zipper, and zippered hand pockets make the jacket both protective and functional.

ConAir InfinitiPro Hair Dryer

Regular Price: $49.99

Sale Price: $29.99

ConAir is one of the biggest names in hair and beauty, and the InfinitPro is an 1875 watt hair dryer designed for professionals with ceramic technology. The dryer comes with a diffuser and concentrator, and it allows you to blow out your hair just the way they would at the salon.

Deals the Experts Are Hoping For

Experts believe that Amazon’s Black Friday sale could linger for quite some time. It all started with the Prime Early Access sale on October 11 and 12. Previously, Amazon has offered the “Epic Deals” sale that ran through late October. 

This is to say that any sale could come up at any time. 

Even so, those monitoring Amazon are looking forward to a few potential deals, including:

  • Apple Watch
  • AirPods (any generation)
  • MacBook Pro
  • Large, underpriced TVs
  • Amazon Echo
  • More small home appliances (Dyson or Shark vacuums, Instant Pots, etc.) 

While these predictions are based on last year’s Amazon Black Friday Sale, it’s important to remember that most Black Friday sales are fairly consistent and push the products that are most likely to sell.


Featured image sourced from Shutterstock

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