The presidential election has the potential to reshape the investment landscape. Below, we detail what Wall Street is saying about the implications for investing across multiple asset classes. This is the first in a five-part series on the impact of both President Trump and President Harris on the United States. consumer.
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With just over a week left until the presidential election, polls show the candidates in a close race, and Americans are anxious about how their lives will change under a new leader.
Business Insider has prepared a five-part refresher as the final step in uncovering the potential impact of both President Donald Trump and President Kamala Harris on U.S. consumers. Today’s first installment will focus on the investment environment.
So far, Mr. Trump and Ms. Harris have outlined specific policy proposals that would affect various parts of the stock market. Those various platforms are also important in determining the direction of future interest rates that shape the bond market.
However, both candidates are seen as positive forces for cryptocurrencies and are not expected to have a diametrically opposite impact on everything.
Below you will find detailed latest research and commentary from Wall Street’s top strategists, outlining how the market and investment environment could change under a potential Trump or Harris administration.
The guide covers four specific asset classes, broken down by President Trump and Harris’ impact on each.
stock
From an equity perspective, it’s helpful to look at the potential impact, both micro (specific sectors expected to be affected) and macro (how the broader market will react).
playing cards
sector
Much of the industry guidance for the stock market under Trump ultimately boils down to his proposed tax policy. Bank of America says its plan to cut the corporate tax rate from 21% to 15% will boost corporate profits by 4%. The extent to which each sector is affected will ultimately depend on its sensitivity to changes in tax rates.
To that end, BofA says the consumer discretionary and communications services sectors — the areas most susceptible to tax rate changes — will benefit the most. Conversely, less exposed sectors such as utilities, real estate, and energy will be least affected.
Regarding energy in particular, BNY Wealth notes that President Trump’s pro-drilling stance, while supporting industry activity, is likely to lead to oversupply and a fall in oil prices. This, in turn, would hurt the profitability of companies in this sector and push down stock prices.
It’s also worth noting that energy was the worst-performing sector during Trump’s last presidential term.
Financials is another area of the stock market that is expected to benefit from a Trump victory. Supporters of the former president say he aims to relieve banks from many of the regulations imposed after the 2008 financial crisis, which his first administration tried with little success. There wasn’t.
Such deregulation could also trigger a new wave of mergers and acquisitions, boosting advisory income for big banks and boosting their trading profits.
broader market
When you zoom out to assess the overall state of the stock market, opinions are divided, especially along partisan lines. President Trump’s proposed tax and regulatory policies are seen by his supporters as pro-business and could be good news for corporate profit growth and trading activity.
But Trump’s critics say his proposals for universal tariffs and higher taxes on imports from China, as well as immigration crackdowns, are inflationary and could depress stock prices. claims. The nonpartisan Tax Foundation says the tariff plan, in particular, could hurt profit margins and depress consumer spending.
Bank of America estimates that if tariffs were imposed on China by 60% and other countries by 10%, earnings per share for the S&P 500 would decline by 3.1%. This will be a problem because earnings growth has long been the stock market’s main profit driver.
“The conventional wisdom is wrong. Trump won’t cut taxes significantly once he takes office. He’s going to raise tariffs and raise taxes. To the extent this suppresses economic activity, it’s bad news for stocks,” said BCA Research Director. said. Strategist Peter Berezin said:
Harris
sector
As with Trump, much of the stock market guidance under Harris has to do with her tax plan. His proposal to raise the corporate tax rate from 21% to 28% would have the opposite effect on sectors.
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This means consumer discretionary and communications services, the biggest beneficiaries under the Trump administration, will be hit the hardest under the Harris administration, BofA said.
BNY Wealth says, “Consumer discretionary stocks have slightly underperformed the S&P 500 since Harris announced her candidacy for president, but this is likely due to corporate tax and “This reflects concerns that employees’ wages may rise.”
Financial institutions will also feel the negative impact of both the tax increases and the increased regulation proposed by Harris.
However, there are bright spots as well. Harris’ victory is likely to benefit homebuilding stocks due to her proposal to build 3 million homes. Renewable energy stocks should also rise as Democrats view wind and solar energy favorably.
Both sectors have outperformed in recent months when Ms. Harris was showing positive momentum in election polls.
broader market
The stock market has posted a record surge during President Joe Biden’s term, rising more than 50% since taking office, and Kamala Harris’ victory could be a continuation of many of the same policies that have supported the market. Highly sexual.
These include infrastructure investments and tax incentives to bring manufacturing jobs, such as the semiconductor industry, back home through CHIPS and the Science Act.
But BofA said Harris’ tax hike proposal would also put downward pressure on corporate profits, estimating a 5% hit to profits. Furthermore, if the stock buyback tax quadrupled to 4%, the S&P 500’s profits would decline by 1%, the company said.
With all these crosscurrents swirling around, neutral market outcomes must also be evaluated.
impact may be weakened
Capital Economics believes that neither Trump nor Harris’ wins will mean much for stocks, as larger trends, particularly AI, will dictate the direction of the market.
“Our optimistic forecasts for the stock market in 2024 and 2025 are based on the view that AI hype will continue to fuel stock market bubbles,” the research firm said. Capital Economics has an S&P 500 price target of 7,000 by the end of 2025, regardless of which candidate wins the election.
Meanwhile, Bank of America said the stock market will rise no matter who wins the White House as long as corporate profits continue to grow.
bond
The performance of the U.S. bond market is highly dependent on the direction of interest rates.
When interest rates rise, bond prices generally fall, and vice versa. And since presidential actions usually affect interest rates, the bond market will be shaped by what either Mr. Trump or Ms. Harris ends up doing.
playing cards
If Trump wins, interest rates are expected to rise and bond prices will fall. It ultimately comes down to inflation.
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Economists say President Trump’s double-whammy proposal of mass deportations and universal tariffs will lead to inflation. And since the Fed’s main tool for fighting inflation is raising interest rates, rising yields will cause bond prices to fall.
“We believe a Trump victory will lead to higher U.S. yields,” Capital Economics said.
The Committee for a Responsible Federal Budget, a nonprofit think tank, estimates that higher deficits and higher debt under President Trump than under President Harris will also put upward pressure on interest rates. If that happens, the performance of bonds will also suffer.
Harris
Capital Economics expects interest rates to be lower than a Harris victory, as she is not likely to pursue specific inflationary policies such as tariffs or immigration deportations that could accelerate wage inflation. He said he expected this to be good news for bonds.
Harris’ policies are thought to lead to lower inflation than Trump’s, which would allow the Federal Reserve to continue lowering interest rates, pushing bond prices higher.
A Bloomberg survey of institutional investors last month found that 30% of investors said they would increase their bond exposure if Harris won, but just a few said they would buy more bonds if Trump won. It was 17%.
Additionally, 46% of respondents said they would reduce their bond exposure if Trump won, compared to just 23% if Harris won.
cryptography
playing cards
Trump’s victory is seen as bullish for Bitcoin and the broader crypto industry, as former President Donald Trump has firmly embraced digital assets in recent years.
If Trump wins the election, Bitcoin could reach $90,000 by December, an increase of about 37% from current levels, according to Bernstein analyst Gautam Chughani. That’s what it means.
“The election remains difficult to decide, but if you are long crypto here, you will probably be taking a Trump trade,” Chugani said.
Harris
Harris has also been active in the crypto industry in recent months, with Trump expressing support in public, including speaking at crypto conferences and launching her own NFT. When you think about it, he is seen as a little less bullish than Trump.
But Wall Street seems to think that no matter who wins, Bitcoin will remain unscathed by the big lawsuit. The US government’s debt mountain is expected to grow regardless of who controls the White House. This scenario is one of the biggest bullish arguments for Bitcoin.
“I don’t know whether the president or another candidate will bring about change,” BlackRock CEO Larry Fink said during the company’s third-quarter earnings call. I believe this will increasingly become a reality.” phone.
USD
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The dollar is expected to appreciate due to President Trump’s tax and protectionist trade policies. This is the opposite of what presidential candidates want, since a weaker currency would make a country’s exports more competitive in global trade.
These policies are expected to cause inflation, potentially raising interest rates and prompting the Fed to tighten. These higher interest rates will support the dollar’s appreciation.
“If he retakes the White House, the dollar will likely appreciate, at least in the near term, on expectations of U.S. tariff and interest rate hikes,” Capital Economics said in a recent study.
Harris
Capital Economics predicted that if Harris becomes president, the dollar will continue to weaken due to the Biden administration’s “continuation of policies.”
Because Harris’ overall platform is less expansive, inflationary pressures are also expected to ease, thereby keeping the Fed’s current plans for rate cuts and economic stimulus intact.
The possibility of lower interest rates will push the dollar lower.
