Presidential Election 2024: Impact on Markets & Policies

With the majority of votes counted, Donald J. Trump is projected to win the 2024 U.S. Presidential Election. The Republican Party has also increased its representation in Congress, securing control of the Senate. However, several House races remain undecided, leaving the balance of power in the House of Representatives uncertain. We expect those results to be finalized soon.

When we look back historically with over a century of data, we see that financial markets typically perform well under all combinations of government. Elections tend to be more noise than signal when it comes to investment portfolios. It’s not that elections aren’t important – they are – but they are just one of many factors influencing the direction of markets. Economic growth, inflation, interest rates, and corporate fundamentals, for example, tend to be more important.

Governmental policy can of course impact all of the above, but again it’s just one piece of a larger puzzle. And though the market’s historical track record tells us not to make any dramatic portfolio changes due to the election outcome, there are several items we’ll be keeping a close eye on going forward.

While not an exhaustive list, what follows are some key policy changes proposed by the new administration that will potentially have an impact on financial markets:

• Tax policy
  There’s likely to be a push for lower corporate taxes as well as extending the individual tax cuts put in place during the first Trump administration.
  
  
• Energy policy
  We expect certain provisions from the Inflation Reduction Act that promote clean energy to remain in place, but this administration will also likely incentivize further domestic fossil fuel production.
  
  
• Regulation
  Republicans have generally taken a more laissez-faire approach to regulatory policy, but there will be a focus on so-called “big tech” companies.
  
  
• Deficits
  Precise annual deficit numbers are highly uncertain and the budgeting process is fluid, but the proposed Trump budget is poised to run fiscal deficits and further increase the national debt.
  
  
• Global trade
  There seems to be a relatively bipartisan agreement regarding international trade relationships, especially a “tough on China stance”. It is likely that current tariffs remain in place and the administration focuses on reducing our trade deficit with China. We’d also expect a further increase in some tariffs, though the specifics are vague.
  
  

It is difficult to predict how and when legislation will be passed, so our Investment Committee avoids making large adjustments to investments based on such uncertain outcomes. And because campaign rhetoric often doesn’t translate directly to specific laws, what candidates propose prior to the election is typically not a solid foundation for an investment thesis. George Washington supposedly told Thomas Jefferson over breakfast that “We pour our legislation into the Senatorial saucer to cool it.” The idea is that more extreme policies often get watered down on their way to being enacted into law.

Any time there are changes to our government’s leadership, that uncertainty can bring with it market volatility. This is a normal part of the investment cycle, and our portfolios are built to withstand various market environments. And with volatility often comes opportunity, and we’re ready to adjust as needed.

Remember, investing is about the long-term, and that’s where our focus will remain. Please reach out to your Wealth Advisor with any questions you may have.