Billionaire hedge fund manager Paul Tudor Jones said Thursday morning that a Democratic sweep in the 2020 elections may result in an initial pop in equity markets, but warned that stocks and bonds could come under pressure later as a potential Biden tax plan erodes profits.

Expected relief to Main Street, combined with another round of stimulus checks to most Americans, could lead retail investors to fuel a market rally in the first quarter of 2021, he said, according to CNBC.com.

“I think that narrative around what will happen if we have that blue wave will be correct in the sense that next year you’re going to get a massive fiscal stimulus, you’re going to get a big boost to the economy. There’s no doubt that Main Street under this program is going to benefit,” Jones told the network.

“But the other side of that is what also happens to financial assets. I think under a blue wave, and the Biden tax plan, financial assets over the long run suffer a great deal,” he said.

“There’s an inverse relationship — it’s loose but it’s clearly there — between stocks multiples and capital gains tax,” he said.

Biden has proposed raising the capital gains tax rate from 20% to 39.6% for those making over $1 million. He would also increase the corporate income tax rate from 21% to 28%.

Biden would have to win the presidency and his Democratic Party would have to gain control of the Senate and keep control of the House of Representatives in the Nov. 3 election for his tax proposals to become law, Reuters said.

“I think the Biden tax plan is actually going to do exactly what it’s designed to do, which is to help Main Street, help the average American,” he concluded. “And it’s going to come at the expense of the 1%, primarily whose wealth is encapsulated in the stock market and financial assets.”

Even if Biden wins and implements his tax plan, corporate owners may still have time to cash out. Most of President Donald Trump's corporate tax cuts, which were enacted into law in 2017, became effective in 2018, a year after he came into office.

Still, the big uptick in the divestitures of privately owned companies shows how some of their owners view Biden's election victory, and subsequent tax changes, as likely.

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