Scenario analysis

Overall economic impact likely to be smaller than Biden’s term. Taxes on higher-income households likely increase. Modest negative for economic growth. Disinflationary impact, leading to somewhat larger Fed rate cuts. Slightly negative for the USD.

Interest rates likely to decline, led by the front end of the yield curve. The curve normalizes and returns to being upward-sloping given lower inflation and growth and larger Fed cuts.

Slightly negative impact on equity market due to possible increase in corporate tax rates and potential for greater regulatory oversight. Positive for select companies within industrials, materials, and utilities focused on renewables and energy efficiency. Worst-case scenario for financial services and somewhat of a negative for the fossil fuel energy industry.

Somewhat negative for the fossil fuel energy industry. Greater regulation could lead to higher costs for producers and higher prices for consumers. Curbs on oil and gas drilling activity are possible, but the Supreme Court’s decision in Loper Bright (Chevron deference) could curtail the level of agency activism. Risks to M&A activity could increase. Positive for the renewable energy industry.

Worst-case scenario for financial services. Enactment of the Credit Card Competition Act would be more likely. New regulations and more stringent interpretation of existing regulations would likely continue to drive up costs. Critical rhetoric and headline risk could discourage or delay industry consolidation.

Greater congressional and regulatory oversight of aerospace and freight rail, but major legislation unlikely. IRA beneficiaries could experience a relief rally. Potential for more stringent pollution-related regulations on industrials, chemicals, and mining.

Continued support for domestic semiconductor manufacturing.

Regulatory oversight on managed care and continued antitrust scrutiny. Perhaps some effort to expand IRA drug price negotiating powers, although likely limits on how far Democratic senators in key biopharma employer states will go.

Possible further minimum wage increases, increasing ease of union organization and support for unions, likely negatively impacting restaurants and parts of retail.

A clean sweep increases the potential for legislative action related to Section 230 safe-harbor provisions (limits liability for internet service providers, but still allows them to moderate content). This is a potential risk for roughly 65% of sector market cap.

Smaller impact than the blue sweep scenario. Taxes on higher-income households could rise but by less than in a blue sweep scenario. No corporate tax hikes but stringent regulatory oversight. Outlook for growth, inflation, monetary policy, and US dollar unchanged.

Range-bound interest rates. Move in interest rates will be due to the lagged impact of sharply tighter Fed policy during 2022–23.

Minimal impact on equity market. Positive for select companies within industrials, materials, and utilities focused on renewables and energy efficiency. Neutral to negative for the fossil fuel industry and the negative regulatory overhang on financial services would continue.

Neutral to negative for the fossil fuel energy industry, though roughly the status quo with ongoing aggressive regulatory oversight of the energy industry, offset in part by the Supreme Court’s recent decision to overturn the Chevron doctrine (Loper Bright decision). Possible curbs on oil and gas drilling activity. M&A activity should continue but with ongoing regulatory risks. Neutral to positive for the renewable energy industry.

The regulatory pendulum, which has swung against the industry in recent years, would likely remain a constraint. Anti–big financial services company ideology would remain in place.

Greater congressional and regulatory oversight of aerospace and freight rail, but major legislation unlikely. IRA beneficiaries could have a relief rally. Potential for more stringent pollution-related regulations on industrials, chemicals, and mining.

Continued support for domestic semiconductor manufacturing. Regulatory scrutiny of large tech companies likely to continue.

Limited ability for Harris to push any legislation. Continued focus on increased regulatory and antitrust oversight, mainly impacting managed care and providers.

Continued regulatory oversight but limited direct impact on consumer companies.

Limited impact as the status quo likely continues, with continued scrutiny of the big tech companies within the sector.

Overall economic impact should be positive, but inflationary pressure increases, resulting in fewer Fed rate cuts. Positive for the USD at least initially, but higher deficits and trade tensions could later undermine the dollar.

Interest rates likely increase led by the back end of the yield curve due to inflationary pressures. Increased Treasury supply due to rising deficit also pushes longer-end yields higher. Heightened interest rate volatility due to geopolitical concerns ensues.

Slightly positive equity market impact. Less regulation, potential for more M&A, and possibly lower corporate tax rates would all be supportive, but a stronger USD, higher tariffs, and inflationary pressures would be headwinds. Most positive scenario for the fossil fuel energy and financial services industries. The consumer discretionary, industrials, and information technology sectors would most likely be negatively impacted by higher tariffs.

Most positive scenario for the fossil fuel energy industry. Regulatory and legislative risks decline. Industry would likely maintain lower emission investments (e.g., methane). Oil and natural gas investment could increase. Industry consolidation, more drilling activity, and higher exports of natural gas. Negative for the renewable energy industry.

Best case scenario for financial services. A potentially more favorable (less punitive) regulatory environment could emerge that could lead to cost savings and greater ability to return capital to shareholders. Financial services industry consolidation could face less political or regulatory resistance.

Less support for green energy initiatives could crimp investment spending in this area. Less onerous pollution regulation. A reimposition of tariffs could drive up US metals, supporting steelmakers but hurting heavy manufacturing.

Continued support for domestic semiconductor manufacturing. Increased tariffs could have direct and indirect impacts on hardware and semiconductor companies, with negative implications for smartphone manufacturers. Additionally, blowback from China could be a headwind for non-domestic vendors and their suppliers.

Most likely less regulatory oversight on healthcare. However, Trump’s prior proposal for an international drug pricing index would be quite negative for biopharma. Lower antitrust oversight would enable more consolidation, which would be fueled by pressure on drug pricing.

Tariff risk. This would impact retailers. Most goods sold by US retailers are imported (apparel, footwear, sporting goods, small household appliances, electronics, etc.). China is still a major manufacturing hub for all these products.

A clean sweep increases the potential for legislative action related to Section 230 safe-harbor provisions (limits liability for internet service providers, but still allows them to moderate content). This is a potential risk for roughly 65% of sector market cap.

Overall economic impact should be positive but less than in red sweep scenario. Tariffs still add to inflationary pressure, making it more difficult for Fed to cut rates aggressively. Positive for the USD at least initially, but higher deficits and trade tensions could later undermine the dollar.

Slightly higher interest rates in line with the stronger USD. Volatility rises due to geopolitical risk and ambiguity over the Fed reaction function.

Mixed equity market impact. Less regulation and potential for more M&A would be supportive, but a stronger USD, higher tariffs, and inflationary pressures would be headwinds. A likely easing in regulatory risks should benefit the fossil fuel energy and financial services industries. The consumer discretionary, industrials, and information technology sectors would most likely be negatively impacted by higher tariffs.

Somewhat positive for the fossil fuel energy industry as regulatory risks would likely decline. Industry would likely maintain lower emission investments (e.g., methane). Likely a clearer regulatory path toward the necessary investment for industry consolidation, increasing drilling activity and exports of natural gas.

The appointment of new regulatory heads at the Fed, FDIC, OCC, and SEC would likely be positive (personnel is policy). Although regulatory costs could ease somewhat, a Democrat-led House could hold anti–financial services hearings, which could lead to negative headline risks for the industry.

Uncertainty around green energy initiatives could crimp investment spending in this area. Less onerous pollution regulation. A reimposition of tariffs could drive up US metals, supporting steelmakers but hurting heavy manufacturing.

Continued support for domestic semiconductor manufacturing. Increased tariffs could have direct and indirect impacts on hardware and semiconductor companies, with negative implications for smartphone manufacturers. Additionally, blowback from China could be a headwind for non-domestic vendors and their suppliers.

Limited bipartisan legislation is possible. Legislation affecting pharmaceutical prices could be one area of potential bipartisan compromise.

Tariff risk. This would impact retailers. Most goods sold by US retailers are imported (apparel, footwear, sporting goods, small household appliances, electronics, etc.). China is still a major manufacturing hub for all these products.

Limited impact as the status quo likely continues.