As the U.S. elections draw closer, Axel Brosey examines the potential impact of a victory by either Kamala Harris or Donald Trump. His analysis on finews.first explores how each outcome could influence the stock markets.
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The US elections could still swing either way. According to the polls, neither Kamala Harris nor Donald Trump have been able to gain a clear lead in the key swing states such as Arizona, Georgia, or Nevada. Who holds the majority in these states changes regularly, due to how close the race is. What is clearer, however, is which economic objectives the two candidates would pursue if they were to win the election. Trump and Harris are particularly far apart on the four issues of market regulation, taxes, foreign trade, and climate protection.
Harris is pursuing an economic policy aimed at more regulation and consumer protection. She is planning measures to ease the burden on the middle class – such as lowering food prices by banning price gouging and limiting the power of large corporations. She also wants to promote housing construction and create up to three million new units to stabilize rents.
Another key objective is to support first-time home buyers and provide tax relief for families and small businesses. In the healthcare sector, Harris is focussing on lowering costs for medication and paying off medical debts, as well as reducing the premiums for Obamacare health insurance. Families are to be relieved with an increase in child benefits and tax reliefs, while employees in essential professions and small businesses will receive more support as well.
«It is also interesting to see how both candidates view foreign trade»
In contrast, Trump urges deregulation in favor of companies. He sees excessive regulation as an obstacle to economic growth and believes that less government intervention allows companies to react more flexibly to market needs. Trump's tax policy, on the other hand, focuses on extending the 2017 tax cuts. Specifically, he wants to further reduce corporate taxes and eliminate taxes on social security benefits for seniors.
It is also interesting to see how both candidates view foreign trade: Harris pursues a diplomatic approach that favors cooperation and international norms. She favors negotiations and cooperation rather than confrontation. Trump, on the other hand, advocates a protectionist policy that favors trade wars and higher tariffs, especially against China, which he sees as his main economic adversary.
There are also clear differences when it comes to climate protection. Harris aims to continue the measures put in place by the Biden administration and supports international cooperation on climate issues such as the Paris Agreement. She wants to drive forward the expansion of renewable energies. Trump, on the other hand, rejects most climate protection initiatives, promotes fossil fuels, and seeks to deregulate the energy sector. He sees fossil fuels as central to US energy independence and rejects the expansion of renewable energy as too expensive and inefficient.
«The stock markets usually benefit from election years»
These positions show the clear divide between the two candidates in the areas of market regulation, taxes, foreign policy, and climate protection. Overall, Harris is pursuing Keynesian-inspired policies, while Trump is pursuing neoliberal-inspired policies.
The stock markets usually benefit from election years, because new impetus is provided regardless of the outcome. Politics set the framework conditions for the economy and the financial markets. Ultimately, however, measures are often not implemented as drastically as they were originally announced. A moderate to positive development of the stock markets is therefore likely. The capital markets often anticipate developments beforehand – and a look at this year's changes in valuations in the described sectors suggests that possible negative aspects have already been anticipated.
But how would either candidate winning impact the markets? In the short term, Trump could indeed be received more favorably by the stock markets – after all, tax cuts and deregulation would initially have a positive effect on corporate profits. In the medium term, however, his protectionist agenda could have negative impacts. By prioritizing consumer empowerment and investments in renewable energy and infrastructure, Harris stands for more stable and sustainable growth in the long term. This would probably have a positive impact on the stock market in the medium term.
It is up to the Americans which path they will choose – we will see the result on 5 November 2024.
Axel Brosey is a Senior Fund Manager at Laiqon Group, responsible for the equity fund LF – Green Dividend World, which focuses on global dividend stocks that aim to make a positive environmental impact.
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