The upcoming presidential election holds the potential to reshape the financial landscape, with notable implications for investors across sectors, the Wall Street Journal reports.
Wall Street strategists have been closely analyzing the potential effects that both a Trump or Harris presidency could bring to the investment world. This analysis, the first in a five-part series, examines how each candidate’s proposed policies could influence major asset classes—from stocks to bonds to cryptocurrency and the US dollar.
Under a Trump presidency, investors may see benefits in sectors sensitive to tax cuts, such as consumer discretionary and communication services. Trump’s tax plan to lower the corporate tax rate from 21% to 15% could be particularly advantageous for high-tax-rate sectors, potentially boosting corporate earnings by about 4%. This could lead to higher stock prices for companies with strong consumer bases, particularly in industries such as retail and digital media.
Financials, including large banks, could also stand to gain. Trump’s plan to reduce regulatory hurdles aims to free up capital within the banking sector, encouraging mergers and acquisitions that could boost revenue. His deregulatory approach has garnered favorable responses from market analysts, who predict increased profitability in financials under reduced compliance costs.
However, other sectors might see mixed results. Trump’s support for increased domestic energy production could lead to a temporary surplus of oil, which may drive energy prices lower. While beneficial to energy consumers, this could negatively affect profits for oil companies in the US, impacting their stock values.
In contrast, a Harris administration may bring stronger growth to renewable energy sectors and homebuilders, given her proposals for green energy initiatives and affordable housing investments. However, Harris’s proposed corporate tax increase from 21% to 28% might dampen profits, particularly in consumer-driven sectors.
The overall market could also see notable shifts based on the differing economic policies of each candidate. Trump’s tax and regulatory proposals are viewed by many of his supporters as pro-business measures that could stimulate corporate earnings and drive market growth. However, the introduction of tariffs on imported goods could be inflationary, which some analysts believe could put pressure on consumer spending. According to the nonpartisan Tax Foundation, such tariffs could marginally impact S&P 500 earnings, as they may reduce profit margins.
On the other hand, analysts see a Harris presidency as one likely to continue the current administration’s supportive policies toward infrastructure and semiconductor manufacturing, potentially boosting sectors tied to technology and construction. However, a higher corporate tax rate and increased tax on stock buybacks could place some downward pressure on corporate earnings, moderating gains in the broader market.
In the bond market, interest rates play a pivotal role, and each candidate’s policy stance could significantly impact bond values. Trump’s stance on tariffs and immigration is seen as inflationary, which could drive the Federal Reserve to raise interest rates in response to rising inflation. Higher interest rates would likely decrease bond prices, impacting bondholders who would see reduced returns on their investments.
Harris’s policies, which favor more moderate spending, could support lower inflation rates, which might result in a friendlier bond market. Lower rates could benefit bondholders, as bond prices generally rise when interest rates fall. According to recent surveys, a significant portion of institutional investors are likely to increase their bond holdings if Harris is elected, with many citing expectations of lower inflation and interest rates.
Cryptocurrency markets may experience an upswing regardless of the election’s outcome, as both candidates have shown support for digital assets. Trump’s embrace of cryptocurrency has led some analysts to predict that his presidency could drive up Bitcoin prices, with some estimates suggesting a potential climb as high as $90,000 by the end of the year.
Harris, while seen as somewhat less enthusiastic than Trump in her public statements on crypto, is nonetheless expected to create favorable conditions for digital assets. Wall Street analysts believe that the national debt trajectory will continue to grow regardless of the election’s outcome, which could be supportive of crypto assets as alternative stores of value.
The strength of the US dollar is likely to be impacted by either candidate’s policies on trade and taxation. Trump’s tax cuts and tariffs on imported goods could lead to a stronger dollar, as they drive up inflation and prompt the Fed to raise interest rates. Higher interest rates tend to make the dollar more attractive to global investors, potentially strengthening it in the short term.
Conversely, Harris’s policy framework, which is expected to be less inflationary, could lead to a weaker dollar as the Federal Reserve might continue its approach of lowering rates to support economic growth. Analysts suggest that this scenario could further stimulate US exports, making American products more competitive abroad.
The investment landscape under a Trump or Harris presidency presents both opportunities and risks, with potential benefits across specific sectors depending on policy priorities. While Trump’s tax cuts and deregulatory approach could fuel growth in the financial and consumer sectors, his proposed tariffs might place some pressure on consumer spending and inflation. Harris, with a focus on green energy and affordable housing, could bolster homebuilders and renewable energy stocks, though higher corporate taxes might weigh on overall profitability in certain sectors.
