The sharply divergent agendas of Vice President Kamala Harris and former President Donald Trump are familiar to us all. The November US elections will play out in a very different environment than the 2020 elections, when the nation was in the pandemic’s grip. Today, the economy, employment and wage growth are solid…home prices and stock market indexes are at near-record highs. Nevertheless, many voters are stuck in a vibecession—pessimistic after stubborn inflation and steep home mortgage rates, not to mention soaring federal deficits.
To help you sort what the November US elections mean for your finances and portfolio, Bottom Line Personal spoke to economic and political strategist Greg Valliere, who has more than 40 years of experience in Washington, DC…
I see three major outcomes for the Presidential and Congressional elections. These outcomes will affect everything from your taxes…to what you pay for consumer goods…to the best sectors of the stock market for your investments.
Blue Wave. Vice President Harris wins a first term with the Democrats in charge of the US Senate and House of Representatives. What to expect: Policies similar to those of her former boss, President Biden—higher taxes for wealthier Americans, lower prescription drug costs and more social programs to help middle- and lower-income Americans. The stock market might experience headwinds if taxes on corporations are hiked.
Red Wave. Former President Trump is re-elected for a second term, and both chambers of Congress are controlled by Republicans. What to expect: Lower taxes, a looser regulatory environment, harsher trade policies and a rollback of the Biden-Harris administration’s transition to clean energy. These moves could boost the stock market but keep inflation elevated.
Divided Government. One party controls the White House…the other controls one or both chambers of Congress. What to expect: This is a recipe for legislative gridlock. Either President’s agenda could be blocked or pared down. Yet this might be the best outcome for investors. Gridlock brings more certainty to the economic landscape.
My take: The Republicans have a narrow majority in the House now, but the election could go either way. The Democrats run the Senate, but with several vulnerable seats up for election, control is likely to flip to the Republicans. Major issues to watch out for…
At the end of 2025, provisions of the 2017 Tax Cuts and Jobs Act (TCJA) expire. That legislation slashed individual, estate and corporate tax rates, and instituted higher standard deductions and a $10,000 cap on federal deductions for property, sales or income taxes paid to state and local governments. Unless lawmakers extend these changes, they all will revert to the 2017 rules.
Blue Wave: Harris has said that building up the middle class would be a defining goal of her presidency. She wants to extend TCJA personal-income tax rates but only for people earning less than $400,000. She has supported a 25% tax on total income including unrealized capital gains for households of $100 million or more. Harris wants to raise the corporate tax rate to 28% from 21%. She also has supported a proposal for a $25,000 tax credit for first-time homebuyers and eligible sellers and an expanded child tax credit.
Red Wave: Trump seeks to extend all the TCJA tax cuts and further reduce the corporate tax rate to 15%.
Divided Government: No matter who is in power, I expect at least some of the TCJA tax cuts will be extended perhaps for a shorter period of years, even if it means deepening the federal deficit. Reason: A steep tax hike on households is something neither Democrats nor Republicans want to be associated with.
Economic tensions between the US and China are likely to intensify regardless of who wins.
Blue Wave: Like Biden, Harris could continue many of the protectionist policies from the Trump era, aiming to reshore economically important industries and keep US technology out of China’s hands. Existing tariffs will continue on Chinese goods, including semiconductor chips, steel and aluminum, but Harris might lean on trade as a way to fight climate change more than Biden, perhaps by encouraging trade in environmentally “greener” products.
Red Wave: Trump would seek a more aggressive trade policy than in his first term, including a 10% tax on imports, a 60% tariff on Chinese imports and restrictions against Chinese companies owning US infrastructure in energy, technology and agriculture sectors.
Divided Government: Many trade moves can be enacted without the full support of Congress. Regardless, they are likely to get widespread approval given the Capitol’s protectionist environment.
The Federal Reserve, not the White House, has the responsibility to control inflation, but each candidate has promised to lower prices.
Blue Wave: Harris wants to enact legislation to bring down everyday costs, including lowering prices on prescription drugs, and paid family leave. She plans to take on big corporations that engage in illegal price gouging and large landlords that unfairly raise rents.
Red Wave: Trump plans to promote domestic fossil fuel production to ease gasoline prices. He wants to reign in federal spending through impoundment, a Nixon-era tactic in which a president refuses to spend money Congress appropriated for programs he does not like.
Divided Government: This might be the best scenario to restrain inflation. A gridlocked Congress is unlikely to pass much new federal spending legislation, which will help moderate the federal deficit, now about $2 trillion annually.
A President’s agenda often helps boost or limit certain industries and areas of the market. Even if there is a divided government and legislative gridlock in Washington, DC, the White House can exert influence and shape investor expectations through executive orders and regulatory oversight and appointments. Likely stock winners and losers in each administration…
Harris Presidency winners…
US semiconductor companies— Harris strongly supported the CHIPS Act, which allocated $53 billion in federal incentives for domestic semiconductor manufacturing. I expect more similar policy efforts and proposals.
Renewable-energy firms—Harris would continue the Biden administration’s fight against global warming. That will boost EV and battery makers, as well as wind and solar power producers.
Harris Presidency losers…
Oil and gas producers—Harris is likely to slow leases for drilling on federal lands and increase EPA pollution regulations.
Large companies engaged in mergers and acquisitions—under Harris, the Federal Trade Commission is likely to continue its heavy antitrust and anti-monopoly mandate.
Trump Presidency winners…
Oil and gas producers. Trump has repeatedly said his administration would “drill baby drill.” Producers would benefit from increased domestic drilling permits, less regulation and expedited liquid natural-gas (LNG) export projects.
Banks would benefit from a rollback of increased capital requirements, which allows them to boost profits by having to hold less of their capital in reserve to ride out tough times.
Trump Presidency losers…
Chinese companies would be hurt by Trump’s aggressive push for more import protectionism.
Renewable energy firms—Trump has pledged to repeal the Inflation Reduction Act and other Biden/Harris policies that benefit green-energy
businesses.
