With the United States presidential election set for November 2024, institutional investors are weighing in on how the stock market might respond to the potential electoral outcomes of Donald Trump or Kamala Harris.
Specifically regarding Vice President Harris, investor sentiment appears cautious, anticipating heightened market volatility. This insight comes from a Bloomberg survey carried out between September 9 and 13, which captured the views of 340 institutional investors.
The findings revealed that almost 30% of institutional respondents are inclined to raise their equity risk if Harris emerges victorious, signifying that a notable faction sees potential in the market under her administration. However, this optimism is overshadowed by Trump’s scenario, where 50% of investors indicated they would increase their equity risk following his election.
In stark contrast, about 40% of those surveyed indicated plans to reduce their equity risk should Harris take the presidency. This response suggests that many foresee market fluctuations and are preparing for a more conservative investment approach. Furthermore, 30% expressed they would maintain their current positions in the event of a Harris victory, indicating an attitude of uncertainty or a predisposition to wait and observe.
Exploring the Concerns Surrounding Harris
The projected impact of a Harris presidency on the stock market is largely influenced by her proposed policies, especially her tax initiatives. These proposals focus on increasing taxes for affluent individuals and corporations, while providing relief and benefits targeted at the middle class.
Investors have voiced worries that such policies might adversely affect corporate earnings, which in turn stokes Wall Street’s anxiety about their potential ramifications on the stock market.
Yung-Yu Ma from BMO U.S. Wealth Management highlighted tax-related issues as a major concern for investors.
“Tax policy is a huge, huge concern for investors. Tax policy is something that is front and center in this election,” he stated.
Additionally, well-known hedge fund manager John Paulson cautioned that the financial markets might face challenges and the U.S. could slip into a recession if Harris’s tax proposals were to be implemented.
“If Harris is elected, I’d pull my money from the market. I’d go into cash and I’d go into gold because I think the uncertainty regarding the plans they outlined would create a lot of turbulence in the markets and likely lower them,” Paulson stated.
Comparative Impact of Harris’ and Trump’s Tax Proposals
In this landscape, financial giant Goldman Sachs (NYSE: GS) has noted that Harris’s proposed corporate tax rate of 28% could potentially lead to a 5% decrease in the earnings of S&P 500 companies.
On the other hand, the same bank suggests that Trump’s tax cut proposal could boost earnings by 4%. The Republican candidate aims to reduce the corporate income tax rate from 21% to 20%, with the possibility of adjusting it as low as 15% for domestic manufacturing firms.
As the election approaches, perceptions among investors may evolve, particularly as Vice President Harris plans to present her economic vision in a speech scheduled for September 25. Sources close to her proposal imply she will underscore her stance as “a capitalist who recognizes the constraints of government.”
Ultimately, the upcoming presidential election is shaping investor sentiment, with expectations that those advocating more favorable policies could gain increased backing.
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