ElectionWatch 2024

A Democratic sweep would likely be the most negative outcome for equity markets, primarily due to a higher probability of higher corporate tax rates. The expiration of some 2017 personal tax cuts could also be a small drag on consumer spending. Regulatory scrutiny could increase in some areas, but this would represent an extension of existing policy. The impact would be limited by recent Supreme Court decisions.

If Harris wins but Congress is split, we would expect much more limited policy changes, and therefore a more muted impact on financial markets. A Harris administration would be obliged to rely on executive action and regulatory oversight to a significant degree, but recent Supreme Court decisions will likely curtail the ability of executive branch agencies to interpret federal statutes.

An extension of the 2017 tax cuts would be likely with a possible further reduction in corporate tax rates. Funding for these initiatives might come from a reduction in support for green energy provisions of the Inflation Reduction Act. Equity markets would likely cheer lower taxes and lighter regulation, but this could be partially offset by concerns about the costs and inflation impacts of higher tariffs and trade wars. Interest rates and the dollar would likely rise initially. Financials stand out as key potential beneficiaries in this scenario due to lighter regulation.

With major fiscal policy changes blocked by a split Congress, higher tariffs and lighter regulation would likely be the hallmarks of this election outcome. Overall, these two forces would have a mixed impact on equity markets. The dollar and interest rates would likely rise modestly. Financials would likely be key beneficiaries of lighter regulation.