Calamos CEO John Koudounis: “Capital Gains Tax Fuels Economic Uncertainty”

Calamos investment’s CEO John Koudounis appeared on Fox Business with Maria Bartiromo recently discussing the drawbacks of President Biden’s announcement to hike the capital gains tax up to 43.4% from its current level of 20%.

Asked what kind of an impact that will have on the economy overall, Koudounis was blunt. “I agree with (JP Morgan CEO) Jamie Dimon that this whole fiscal policy uncertainty, which includes the potential for tax increases, and more regulations, is fueling this volatility.

“It is absolutely negative for long-term strategic growth. We’ve seen how the opposite helps and stimulates this economy during the previous administration. Why do people think when you turn everything and over-regulate, over-tax…” he said, trailing off, before adding “it’s going to hurt the economy tremendously, and that’s what’s creating some of this volatility going forward.”

Bartiromo remarked that she believed it was incredible that not a dollar has been spent on these last two plans and yet the US is expecting 9% growth this year, with the Atlanta Federal Reserve expecting growth of 13% in the second quarter. She asked Koudounis, who has served as Calamos CEO since 2016, why the country would be throwing all that money on an economy that is doing just fine on its own?

Investors crave certainty after capital gains tax announcement

“That’s the question that we have to ask,” the financial guru replied, before adding “and we have to pay for it later on. Of course, the vaccine rollouts, the positive economic data, the fiscal stimulus that accommodated cometary policy — that is all helping, but what happens with this uncertainly going forward?

“One thing we tell our investors is that you have to be in the market, despite the volatility, despite what might be coming in the future; because if you’re not, you’re going to miss it, and it’s hard to time it. Even professionals find it very hard to time it.

“An interesting statistic I want to share is in 2020, if you were invested in the S & P Index every single day of the year, you would have had a return of 18%,” the investment guru remarked.

“Now if you were not invested, and tried to time the market to just five of the best days, you would have had a return of negative 18%. This goes to show you that it is very tough to time the market,” Koudounis noted.

Fixed-income investment yields at rock bottom spur equity market

“The rebounds are usually right after a very bad day, so we tell our customers to choose products that can navigate the uncertainty that we have — products like a market-neutral, hedged equity that can protect you on the downside — and a lot of our convertibles have done very well during this time.”

After Bartiromo noted that yields are at historic rock bottoms, with the Federal Reserve keeping interest rates at the lowest possible level. How important is this, she asked, for the typical investment client right now, while the economy is surging as an estimated one million jobs were added in April and positions are going begging?

“It’s tough,” Koudounis admitted, regarding the job scene at the present time. “A lot of people want to work from home now. We’ll see today that the numbers are going to be very strong. Jobs are coming back.”

Inflation will be tempered by downturn in economy after capital gains tax takes hold

At the same time, he pointed out, “We are not seeing any returns in fixed income. We need to get involved in the equity markets, but be smart about it. And that’s why some of these strategies are really important, to protect yourself going forward.

“You have to get returns in the equity market — you can’t get them in the fixed-income market right now with the interest rates really low, although we are starting to see some inflation,” he noted.

“We’re starting to see (inflation) in the grocery stores, at the gas pumps, and in home building. Lumber is going through the roof.

“But we also feel that as taxes and fiscal policies get inserted, we will see the economy go down tremendously and we’ll see a flight to quality and I think that will bring interest rates back down again. So I’m not really worried about runaway interest rates,” Koudounis explained.

Asked how he felt about the opening of Calamos’ spacious new state-of-the-art headquarters in the Fulton Place building in Chicago, Koudounis was expansive. “We’re growing in Chicago, we’re growing in Miami. Our business is growing really well,” he stated.

“We’ve doubled our AUM In the last four years, over 37.5 billion. And Covid has not stopped us. We’ve been very, very fortunate in that.

State of the art Calamos headquarters in Fulton Market

Calamos Investments has signed recently a multiyear lease for the top floors of Fulton East, an innovative new building at 215 N. Peoria Street, situated in Chicago’s vibrant Fulton Market area.

Calamos’ new location will be an addition to the firm’s headquarters campus in Naperville.

This Chicago office will host up to 100 people that will include flex space for some of the Calamos leadership team, employees, and clients from all over the world, as well as
function as a central meeting and event space for Calamos’ growing businesses.

The downtown location will deepen the firm’s existing ties to the city, broaden access to potential business partners and clients, and diversify its Chicago-based footprint.

“We are very excited to extend our presence in the Chicago area by adding a new office in the flourishing Fulton Market district,” said Koudounis.

“Founder John Calamos and I are both native Chicagoans and we are committed to the growth and success of our city, especially as we move beyond the pandemic. We selected Fulton East in part because it was designed as one of the safest post-Covid office buildings in the country. Our new location in such a dynamic area of Chicago will be a showcase that will help position Calamos for the future.”

“We look forward to deepening our ability to access and leverage the great synergies that Chicago has to offer as we roll out and debut our unique, innovative and unrivaled fund strategies, enabling us to continue to flourish across our businesses,” said Calamos Investments Founder and Chairman John P. Calamos, Sr.