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The pivotal election choice facing America is just one week away. With polls never being closer, tracking very close to 50:50 since Harris stepped in for Biden, investors like us need to assess what will a Trump or Harris win mean for markets globally? What will it mean for your money? For taxes? For house prices? And most importantly how to prepare your portfolio and hopefully navigate the changes to come? These are some of the questions I will discuss today.
So let’s get into it.
So what are markets likely to do on election day if Trump gets in verses if Harris gets in?
Now I’m not making this post/video to weigh in on the personality contest of it all. Plenty of others will do that. I’m simply hoping to highlight what is crucial for investors. As investors, we need to separate popular perceptions of each candidate from the reality of their policies and focus on the likely impacts on corporations, consumers and financial markets.
So what is the current view for financial markets under a Harris win?
Pundits suggest a Harris win would be bad for US companies due to her campaign pledge to raise corporation taxes from 21% to 28% and her preference for greater regulation.
So which sectors are most negatively affected by her regulation proposals:
Fossil fuel stocks in favour of green energy.
Technology with a focus on privacy laws, anti-trust actions, and AI regulation.
Crypto and banking overall.
Healthcare and pharmaceuticals – by tackling high drug prices and insurance practices.
Whereas who may benefit:
Emerging markets, so Chinese stocks and stocks dependent on international trade are more positively affected under Harris, as Trump has proposed severe anti-trade policies.
Overall, markets unlikely to be as volatile initially, as under a Trump win, but the longer-term impact will depend on anticipated policy shifts getting through congress.
What about inflation impacts and therefore interest rates under Harris?
Expectations would likely remain elevated but manageable
What about house prices?
A Harris win could lead to mixed outcomes for house prices. Policies promoting affordable housing, stricter regulations on real estate speculation, and higher taxes on capital gains might slow price growth in high-end markets. However, government spending on infrastructure and efforts to address housing shortages could increase supply in lower and mid-tier markets.
Finally, what about taxes?
A Harris victory would likely lead to higher taxes on corporations and high-income earners. Proposed policies could include reversing parts of Trump’s 2017 tax cuts, increasing capital gains taxes for wealthy investors to 33% (wealthy meaning earning $1M or more), the highest level since 1978 including an utterly ridiculous policy of taxing unrealised gains for investors with $100M or more. However, middle and lower-income households might benefit from targeted tax relief.
What will be the impact of who controls Congress?
There is a key weakening factor to Harris’ administration win. Democrats have little chance of getting the trifecta – meaning gaining the White House, the House and also the Senate. This is due to the current complexities of the Senate which limit the prospects of a Democratic Senate win and put Republicans at a 70% chance of taking the Senate.
Whereas, it’s 50:50 for the House and therefore Harris will have less ability to pass any major legislation without a Democratic Senate.
So that’s a summary for Harris. What about a Trump win?
A Trump win could lead to lower corporate taxes and increased market volatility primarily driven by expectations around changes in trade policy, particularly the imposition of severe tariffs, which would disrupt supply chains and increase inflation, affecting market stability and with a focus on reducing Chinese trade lead to a weaker Chinese yuan and Chinese stocks.
What about inflation and interest rates under Trump?
If Trump wins, inflation expectations likely go up. Trump’s focus on tax cuts and deregulation likely stimulate growth but also increase demand driving inflation higher. Trump’s stance on tightening immigration and reintroducing import tariffs will disrupt supply chains, adding upward pressure on prices.
Plus when you look at overall spending under both candidates, Trump’s proposals are expected to be costlier, adding approximately $7.5 trillion to the deficit (with an estimated range of $1.5-$15.2 trillion) whereas Harris is estimated at $3.5 trillion (with an estimated range no impact up to $8.1 trillion). So both candidates are proposing greater deficits.
What about everyone’s favourite topic, house prices?
If Trump wins, house prices likely rise, particularly in suburban and rural areas, as his policies favour deregulation, lower taxes, and economic growth. However, his push for additional tariffs and immigration restrictions likely increase construction costs, slowing new housing supply and therefore keeping upward pressure on house prices.
Finally, what about taxes?
A Trump victory would likely result in tax cuts, primarily benefiting corporations and high-income earners, alongside efforts to make his 2017 Tax Cuts and Jobs Act permanent. Trump’s key proposals include:
Reducing the corporate tax rate from 21% to 15 .
Extending individual tax provisions that are set to expire in 2025, maintaining lower tax rates and higher standard deductions. Also vote winning policies like “no tax on tips” and eliminating income taxes on overtime wages. Trump has also proposed eliminating taxes on Social Security benefits.
Trump plans to reduce capital gains taxes and further relax estate tax rules.
While these policies could provide short-term economic stimulation, they most likely increase the federal deficit significantly. Analysts estimate that extending and expanding these tax cuts could add over $5 trillion to the national debt over the next decade.
So that’s the summary across major policy areas likely affecting your investments.
But what can history tell us?
I did some analysis back to the 1950s on S&P500 performance under each administration and the data is mixed and doesn’t tell us much. Take a look at this table. An interesting point, since the beginning of quantitative easing post the financial crisis of 2008 each presidential term, whether Republican or Democrat, has resulted in an over 50% gain for the S&P500, which is amazing considering all the crisises we have had, but you only need to look back a little further to the 1980s to see a four-term consecutive run of 50%+ returns is not new.
So how should you prepare your investments?
From this analysis you can see some clear winners and losers arise. No matter who wins, big spending on infrastructure seems likely so positioning for that seems like a high probability approach.
Both administrations have proposed greater regulations of big tech but I see this as low risk, as tech is far too important to the US economy, making up over 30% of the S&P500 now, and they are significant job creators.
Both candidates are inflationary and deficit expanding which means the Fed will struggle to continue to cut interest rates.
While the common perception is the US stock market would respond better to a pro-business Trump win, investors really need to take onboard the full implications of his plan to impose stringent tariffs on imports. This is likely his biggest economically negative policy.
Comparing to his first administration, where Trump imposed tariffs but the overall net effect was just 2% across all US goods imports due to substitution effects. Whereas, this time, he is proposing tariffs of 17% which would represent the highest level since The Great Depression and one of the biggest tax hikes in history. Trump plans for a blanket 10% tariff on all imports, in addition to 60% on China.
A KEY POINT here, is that unlike Trump’s arguably unaffordable tax cuts, or many of the market-unfriendly policies backed by Harris, the President alone has wide authority to impose tariffs WITHOUT approval from Congress! So no checks and balances and moderating of wild policies. So Trump would have the power to negatively impact growth globally with these tariffs, and they rarely go unanswered and in a global trade war, everyone loses.
So what does all this mean?
Uncertainty! Markets do not like uncertainty and Trump likely brings far more uncertainty than Harris. Not to mention the likelihood of the election being challenged if Harris wins.
What are the chances of this?
Sadly it’s so tight nobody knows, as there’s a 50% chance Trump wins and a 50% chance Harris wins. Then there’s the unknown of which policies actually get implemented. So significant unknowns ahead. Perhaps why the famous Warren Buffett has increased his cash pile to sit back and wait for the unknowns to become knowns?
Before I close this post/video, here’s a little summary of expectations as they stand today.
If Trump wins:
1. Focus on Energy and Defense Stocks
2. Prepare for Tariff-Related Volatility (meaning focus on domestic heavy stocks)
3. Consider Real Estate and REITs (but only if interest rates can remain relatively low)
4. Financials and Banks should benefit (e.g., bank ETFs, JPM etc.)
5. Position for Inflation Protection (e.g., gold, commodities, or TIPS funds) and Crypto and Alternative Assets (knowing they are still very high risk, so allocate cautiously here)
6. Be Ready for Market Volatility! (e.g., long options, increase cash proportion)
If Harris wins:
1. Invest in Clean Energy and Green Technology (e.g., green ETFs, Tesla, etc.)
2. Watch for Higher Taxes on Corporations and High-Income Earners (e.g., move to more tax-efficient investments like municipal bonds and tax-deferred retirement accounts (401(k), IRAs)
3. Look for Select Opportunities in Healthcare and Pharmaceuticals (but beware pressure on profits from potential price controls, knowing Harris may struggle to get this policy through a Republican Congress)
4. Position for Higher Interest Rates
5. Infrastructure Spending Boom (e.g., Infrastructure ETFs, Caterpillar, etc.)
6. Shift Toward Affordable Housing Investments (e.g., residential REITs)
7. Manage Market Volatility with Defensive Assets (e.g., cash, short-term bonds, utilities, consumer staples)
8. International Markets and Trade (e.g., emerging markets and companies with strong overseas operations that benefit from smoother global trade relations)
Good luck folks, it’s likely to be a rocky few weeks.
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