News & Our Thinking

Ward Brown delves into the potential economic implications of the upcoming 2024 presidential election between Kamala Harris and Donald Trump. Discover how different electoral outcomes might influence the financial landscape and what investors should know to prepare for the shifts on the economic horizon.

Transcript

Hello, I’m Ward Brown. The sign behind me is meant to deter motorists and pedestrians from potential danger.

It’s a no-go zone, a lot like the prospect of entering the political arena, but as the election near as we wanted to share some thoughts on the potential impacts and the recent stock market volatility.

The stock market has thrived, and corrected, under both parties recently. Stock market returns under both President Trump and President Biden have been excellent. At Argent, we’re, of course, considering how the election outcome will impact investments. Interest rates are top of mind.

Federal debt and interest expenses are crucial in that rates discussion, Neither candidate seems at all interested in cutting spending or addressing the debt. Government spending will rise. It comes with risk, but recessions are pretty unlikely with that much spending from either side.

Some reforms in the 2017 Tax Cut and Jobs Act expire in 2025. Trump wants to make them permanent and lower the corporate tax rate further. Like Biden, Harris wants to preserve the tax cuts for those making under $400,000 a year, raise the corporate tax rate back up to 28% and increase the stock buyback tax.

Both candidates are pro-US manufacturing in production and pretty tough on China. Companies exposed to China, especially those in things like the semiconductor industry and in and around Taiwan will be affected more significantly. Near shoring and domestic manufacturing will accelerate under both candidates benefiting things like non-residential construction companies.

Both candidates are also proposing policies that have proven pretty problematic in the past. Trump talks about significantly increasing the use of tariffs and a lower dollar, which will reshape a lot of the variables. Trade wars have been traditionally messy. Harris has put forward rent and price controls as potential solutions to inflation that’s still sticking around – that’s been pretty messy as well.

Deregulation is a consistent message from Trump. Biden’s administration has been pretty strict on things like mergers and acquisitions. Harris would most likely be the same, but deal reviews may just disappear under Trump, boosting things like buyout activity.

Energy is, of course, another focus. Harris supports alternative energy, while Trump favors more traditional energy, Trump will try to reverse some of the benefits for renewables from the Inflation Reduction Act, but it is important and beneficial for investors to separate the political narrative from the investment reality. For example, solar and EV stocks haven’t performed very well under Biden and traditional energy stocks didn’t perform very well under Trump.

As the November election approaches, politics will of course continue to influence the investment landscape. Recently we did experience a pretty quick and violent bout of volatility. Stocks corrected about 10% or so. But if you look back a hundred years, there’s typically three 5% corrections in every given year, and a 10% correction about once every 13 months. It happens. It always does.

We’ll stick to our investment process regardless of the election outcome. There are tweaks to Argent portfolios that are possible, but wholesale changes based on the party in office are not expected. We do expect the next presidential election to come and go as all the others have before it.

Thanks very much for watching.

Disclaimer: Performance returns cited represent past performance, which does not guarantee future results. Returns assume reinvestment of dividend and interest but returns do not reflect the effect of taxes and/or fees that an investment would incur. References to specific company securities should not be construed as investment advice. Not all Argent clients may own each company’s stock discussed. Argent portfolio managers may recommend the purchase or sale of these and other securities for their client’s accounts.  A list of all stocks recommended by Argent during the past year is available upon request.  Some data represented in this article is derived from non-affiliated sources Argent deems reliable. However, Argent does not perform any independent research to determine the accuracy of such information. Please visit our compliance page for additional details and disclaimers.