With a US presidential election cycle this year being everything other than calming and stabilizing, people are already asking whether a Republican or a Democrat victory would be better for the US stock markets and the economy overall.
While there certainly may be knee-jerk reactions leading to market volatility and fluctuations in the weeks or days immediately preceding and following the November elections, it is doubtful that stock markets and share performance (of publicly traded companies) over a longer period of time will hinge to a significant extent on which political party is in power.
Economists, analysts, and market-watchers are most likely focusing on broader economic trends and policies (interest rates, inflation, deregulation, tax policy), as well as on globally noteworthy issues (impact of wars or climate on domestic energy or other critically important domestic infrastructure), to determine the impact on earnings and operations of US publicly-traded companies.
Having painted the picture with broad strokes, let’s look at the two specific possible scenarios.
First scenario: Democrats win, and retain the White House under the leadership of president Kamala Harris. Time will tell if she maintains the fundamental macro-economic policies of President Joe Biden, under whom the US economy has regained significant strength post-pandemic and the stock markets have performed well.
The alternative, represented by a shift to a more progressive agenda characterized by legislation implementing higher taxation (particularly of corporations and wealthy Americans) and increased regulation, may, indeed, negatively impact investor perceptions of the economy, as well as actual corporate earnings.
Obviously, both types of Democratic party policies could negatively impact the economy and markets, but it bears mentioning that there certainly can be significant winners as well, such as publicly-traded financial and services organizations that reap benefits from regulatory and tax changes, essential services companies, large established companies, and so on. Moreover, increased investment in national and state infrastructure projects (long associated with Democratic party policies) could benefit companies in the construction, engineering, and materials businesses.
The second scenario is that the Trump/Vance combination wins the election. There is certainly a perception that Republicans advocate for more business-friendly agendas by pushing for lower corporate taxes and deregulation, both of which could theoretically lead to higher corporate profits and stock share gains. Again, though there may be some immediate reactions within the national economy and stock markets based on the election outcome, most experts advise the public to look at the longer-term trends that the Republican ticket would offer.
Republicans advocate for crypto
In terms of specifics, the Republican National Committee’s policy platform specifies that the party – including Trump – has become a strong advocate for bitcoin mining and innovation, so cryptocurrency companies or broader financial services companies embracing crypto companies could benefit greatly during a Trump administration.
Interestingly, though, a new Trump administration would be expected to adopt Wall Street-friendly policies and there are expectations that the relationship between the White House and Wall Street will be significantly less cozy. The rank and file who have consumed the Kool-Aid of Trumpism are not fans of the big banks, and vice presidential candidate JD Vance has publicly made it clear that the Republicans will no longer “cater to the Wall Street Barons.”
The writer is a Jerusalem-based partner in the International Transactions Department of the S. Friedman, Abramson & Co. law firm.