The major Wall Street indices closed the week (19-23 April) flat with the Dow retreating by 0.1%; the S&P 500 by 0.5% while the Nasdaq Composite fell back by 0.3% for its first weekly decline in four weeks despite rebounding 1.4% on Friday.

With the reporting season underway and most companies’ earnings topping expectations amid continuing improvement in macroeconomic data, the ‘animal spirits’ however seemed to have peaked as valuations hover near multi-year highs in the wake of the record-breaking rallies in the preceding weeks.

The current lofty valuations have however also left little wiggle room for strong moves. In fact, it seems that the case of buy on rumour and sell on news has taken hold even when sterling earnings are released.

Judging by the low trading volumes, it would appear that retail interest has tapered off somewhat as attention shift from turbocharged growth stocks to value and cyclical counter due to progress on the vaccine front in the US.

US indices which saw two straight days of losses had rebounded in midweek after investors rotated to reopening play stocks such as those in travel and leisure sectors following Netflix’s guidance of lower subscriptions which was viewed as further evidence of a recovering economy.

The early climb on Thursday the next day was however rudely interrupted by a Bloomberg news report that the Biden administration plans to raise capital gains taxes for the richest Americans from currently 20% to as high as 43%. That’s on top of earlier proposed corporate tax hikes.

Despite the market’s kneejerk pullback on Thursday affecting mostly growth stocks largely because of their handsome gains, the fact is that 75% of US equities are held in retirement accounts, endowments and foreign investors who are not subject to capital gains taxes, according to a UBS note on Friday.

Hence, the impact on overall stock prices as historic trends show will likely be limited in the long run. Furthermore, investors unaffected by the tax will see opportunities to buy on dips which seems to be the case on the last day of the trading week which saw the three indices rebounding, but not enough to claw back earlier losses during the week.

Another reason is that with the Democrats’ slim majorities in the US Congress, the tax bill will face hurdles from the Republicans who will likely force a scaled back version with a more modest increase in tax rates if passed.

This week will be a busy one with lots of news for markets to digest with a Federal Reserve meeting; a flood of earnings including those of Apple, Amazon, Alphabet, Facebook, Tesla, Microsoft as well as semiconductor companies such as Qualcomm as well as jobless data, home sales and the release of first quarter US GDP numbers.

There will renewed focus on inflationary pressures which the Fed chair Jerome Powell will most likely address again; while President Joe Biden is scheduled to address the US Congress on Wednesday how the tax increases will be employed to fund his American Families Plan.

Meanwhile, the surge in coronavirus cases – and worries over a more infectious strain – is expected to weigh on global investors looking at a time when the recovery from the pandemic is increasingly looking staggered and less uniform than markets had anticipated when vaccines were first rolled out. Global daily cases had hit 890,000 in midweek, up from the low this year of 280,000 on 15 February.

The record-breaking daily spikes in India; Japan’s declaration of a state of emergency in major cities which may scupper the Olympic games again; lockdowns in Perth in Australia and Halifax in Canada as well as Singapore’s restrictions on travellers from India have taken the winds out of global recovery trades for now at a time when gold which hit its highest point this quarter last Wednesday is edging closer to the $1,800 psychological level on signals of choppier equity markets ahead.