Getty Images; Jenny Chang-Rodriguez/BI
- The presidential election has the potential to reshape the investment landscape.
- Detailed below is what Wall Street is saying about investing implications across multiple asset classes.
- This is the first in a five-part series about the impact both Trump and Harris presidencies could have on US consumers.
With the presidential election just over a week away, and the candidates in a dead heat in the polls, Americans are in suspense about how their lives will change under a new leader.
Business Insider has prepared a five-part refresher for the final stretch that will unpack the potential impact that both Donald Trump and Kamala Harris presidencies will have on US consumers. Today's first installment is focused on the investment landscape.
To date, Trump and Harris have outlined specific policy proposals that will impact different parts of the stock market. Their varying platforms will also be crucial in determining the future path of interest rates, which will shape the bond market.
But they're not expected to have diametrically opposed impacts on everything, with both candidates seen as positive forces for crypto.
Detailed below is the latest research and commentary from top Wall Street strategists, outlining how the market and investing landscape will shift under potential Trump or Harris administrations.
The guide covers four specific asset classes, and is divided between the Trump and Harris impact on each.
Stocks
From the perspective of equities, it's helpful to look at the potential impact on both the micro (specific sectors set to be impacted) and the macro (how the broader market will respond).
Trump
Sectors
Much of the industry guidance for the stock market under Trump boils down to his proposed tax policies. Bank of America says his plan to cut the corporate tax rate to 15% from 21% will boost corporate earnings by 4%. How much it impacts each sector ultimately depends on sensitivity to changes in the tax rate.
To that end, BofA says the consumer discretionary and communication services sectors — the areas most beholden to tax-rate changes — will benefit the most. On the flip side, less exposed areas like utilities, real estate, and energy will get the smallest boost.
For energy specifically, Trump's pro-drilling stance — while supportive of industry activity — will likely lead to oversupply and lower oil prices, says BNY Wealth. That, in turn, will hurt corporate profitability in the sector and drag on stock prices.
It's also worth noting that energy was the worst-performing sector during Trump's previous presidential tenure.
Financials is another area of the stock market seen benefiting from a Trump win. Allies of the former president have said he aims to unburden banks from many of the regulations that were imposed following the 2008 financial crisis, something that his first administration tried to do with limited success.
Those looser regulations could could also ignite a fresh wave of mergers and acquisitions, which would increase advisory revenue for big banks and help drive up profits from dealmaking.
Broader market
Zooming out and assessing the full equity-market landscape, views are divided, particularly along partisan lines. Trump's proposed tax and regulatory policies are seen by his supporters as pro-business, which would be good news for corporate profit growth and deal activity.
But Trump critics argue that his proposal for universal tariffs and steeper levies on Chinese imports — as well as a crackdown on immigration — will be inflationary, which could hold back stock prices. The nonpartisan Tax Foundation says the tariff plan in particular could hurt profit margins and put pressure on consumer spending.
Bank of America estimates that 60% tariffs on China and 10% on other countries would lower S&P 500 earnings per share by 3.1%. That would be a problem since earnings growth has long been the stock market's primary driver of gains.
"The conventional wisdom is wrong: Trump is not going to substantially cut taxes once in office; he is going to raise taxes by jacking up tariffs. To the extent that this dampens economic activity, it is bad news for stocks," BCA Research chief strategist Peter Berezin said.
Harris
Sectors
Just like with Trump, much of the guidance around the stock market under Harris involves her tax plan. Her proposal to hike the corporate tax rate to 28% from 21% would have an inverse effect on sectors.
That means consumer discretionary and communication services — the top beneficiaries under Trump — would be hit the hardest under a Harris regime, BofA says.
"Consumer discretionary stocks have underperformed the S&P 500 modestly since Harris' presidential candidacy was announced, perhaps reflecting concerns that a Democratic President could result in higher corporate taxes and employee wages," BNY Wealth said.
Financial firms will also feel a negative impact of both higher taxes and Harris' proposed regulatory tightening.
But there are bright spots too. A Harris victory would likely benefit homebuilder stocks because of her proposal to build 3 million houses. Renewable-energy stocks should also see gains due to the favorable view of wind and solar energy by Democrats.
Both sectors have outperformed in recent months during periods when Harris saw positive momentum in election polls.
Broader market
The stock market has soared to records during Joe Biden's presidency, up more than 50% since he was inaugurated, and a Kamala Harris win would likely be a continuation of many of the same policies that have been supportive of the market.
Those include infrastructure investments and tax incentives to bring manufacturing jobs back to the country, like in the semiconductor industry via the CHIPS and Science Act.
But BofA says Harris' proposed tax hike would also put downward pressure on corporate profits, which estimates a 5% earnings hit. Beyond that, a quadrupling of the stock buyback tax to 4% would also take 1% off S&P 500 profits, the firm said.
With all of these cross-currents swirling, a neutral market outcome must also be assessed.
A potentially muted impact
Capital Economics believes neither a Trump nor Harris win will mean all that much for stock prices because bigger trends — specifically AI — will shape the market's direction.
"Our upbeat projections for the stock market in 2024 and 2025 are predicated on a view that hype over AI will continue to fuel a stock market bubble," the research firm said. Capital Economics has a 2025 year-end price target of 7,000 for the S&P 500, regardless of which candidate wins the election.
Meanwhile, Bank of America said that as long as corporate profits continue to grow, the stock market will rise regardless of who wins the White House.
Bonds
The performance of the US bond market largely hinges on the direction of interest rates.
As interest rates rise, bond prices generally fall, and vice versa. And since presidential actions usually impact rates, the bond market will be shaped by what either Trump or Harris end up doing.
Trump
A Trump win would is seen ushering in higher interest rates, which would push bond prices lower. It ultimately boils down to inflation.
Economists see Trump's double-whammy proposals of mass deportation and universal tariffs as inflationary. And since the Federal Reserve's primary tool for fighting inflation is raising interest rates, bond prices would suffer as yields rise.
"Our assessment is that a Trump win would lead to higher US yields," Capital Economics said.
Estimates from the Committee for a Responsible Federal Budget — a non-profit think tank — say a wider deficit and an increasing pile of debt under a Trump presidency, compared to a Harris presidency, would also put upward pressure on interest rates. That would also hurt the performance of bonds.
Harris
Capital Economics said it expects interest rates to fall under a Harris win, which would be good news for bonds, as she wouldn't pursue certain inflationary policies like tariffs or immigration deportations, which could fuel wage inflation.
Harris' policies, considered to be less inflationary than Trump's, would also allow the Federal Reserve to continue on their path of cutting interest rates, which would boost bond prices.
A Bloomberg survey of institutional investors last month found that 30% of investors would add to their bond exposure if Harris wins, while just 17% said they would buy more bonds if Trump wins.
Additionally, 46% of respondents said they would reduce their bond exposure if Trump wins, compared to just 23% under a Harris win.
Crypto
Trump
A Trump win is seen as bullish for bitcoin and the broader cryptocurrency industry, as former President Donald Trump has firmly embraced digital assets in recent years.
According to Bernstein analyst Gautam Chhugani, bitcoin could hit $90,000 by December if Trump wins the election, representing potential upside of about 37% from current levels.
"Elections remain hard to call, but if you are long crypto here, you are likely taking a Trump trade," Chhugani said.
Harris
Harris has also embraced the crypto industry in recent months, though she's seen as slightly less bullish compared to Trump, given his public displays of support, including addressing crypto conferences and launching his own NFTs.
Yet, Wall Street seems to think that a big case for bitcoin will remain intact no matter who wins. The US government debt pile is expected grow regardless of who controls the White House. That scenario is among bitcoin's biggest bull theses.
"I'm not sure if either President or other candidate would make a difference. I do believe the utilization of digital assets is going to become more and more of a reality worldwide," BlackRock CEO Larry Fink said during the company's third-quarter earnings call.
US dollar
Trump
Trump's tax plan and protectionist trade policies are expected to strengthen the dollar. It's the opposite of what the presidential hopeful has said he wants, since a weaker currency makes a nation's exports more competitive in global trade.
These policies are expected to be inflationary, which would push interest rates higher and possibly prompt the Fed to tighten. Those climbing rates would then underpin dollar gains.
"Should he re-take the White House ... the dollar would probably rally sharply, at least in the near term, on expectations of higher US tariffs and interest rates," Capital Economics said in recent research.
Harris
A Harris presidency would continue the trends of a weaker dollar due to "policy continuity" of the Biden administration, Capital Economics said.
Since Harris' overall platform is less expansionary, it's expected to drive less inflationary pressure, and therefore keep the coast clear for the Fed to cut rates and stimulate the economy as currently planned.
That likelihood of lower interest would, in turn, push the dollar lower.
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