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.