What a Trump or Biden Win Means for the Stock Market – Part 2

While no one can say with certainly which way the market will go following the election, here are some thoughts.

With Trump, we could see:

  • Lower taxes
  • Less fiscal stimulus
  • A continued, confrontational approach to US-China relations, which has unsettled markets in the past.

With Biden, we’re likely to see the opposite:

  • More stimulus
  • Fewer international political confrontations
  • But also higher taxes on corporations, capital gains and high-earners’ income.
  • Higher corporate taxes could also include share buyback disincentives.
  • Both higher tax rates and buyback disincentives would be detrimental to the stock market.
  • Biden would likely roll back many of Trump’s executive orders and push for more sustainable energy.
  • Sectors that could come under heightened scrutiny under Biden are large tech companies, healthcare, and financial services.  Since five companies (Facebook, Amazon, Apple, Netflix, and Google) account for 20% of the US stock market, any further scrutiny of big tech will likely have a significant impact on the market.

Regardless of  Who Wins:

Interest rates are an important driver of the market to follow.  Higher interest rates would make stocks and especially tech companies command lower prices.

Bottom Line:

One thing is for sure — expect short-term stock market volatility as the election season heats up.  However, in the long term, economic fundamentals are what drive the stock market.

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