Broadly speaking, Harris’s proposals show a deficit-neutral redistribution from corporate and higher-income taxpayers to lower-income taxpayers.
Trump’s show a slight deficit reduction, assuming tariff revenues offset lower taxes. Again, a divided government is expected to soften the effect of either president’s proposals, and, in both cases, slightly improve the debt outlook.
Uncertainty and volatility
The broad-brush interpretation of these policy positions is that a Trump administration would result in faster growth but higher inflation, a Harris administration would result in less growth and inflation, and a divided government would split the difference.
For investors, a Trump victory might be expected to benefit small caps, mid-caps and sectors that are more sensitive to regulation, such as energy, power, industrials and financials.
It could be uncomfortable for fixed income, as inflationary concerns could create more volatility.
A Harris victory would be more of a continuation of current policies, perhaps resulting in investors’ attention reverting to the wider economic environment and a broadening of equity market performance.
A contested or delayed result is likely to raise volatility. The S&P 500 declined almost 12 per cent from election day to mid-December after the Bush/Gore 2000 election, although many other factors were at play.
History suggests that, once the result is known, a relief rally is likely to greet whoever enters the White House. Let us all buckle our safety belts. The next few weeks, and potentially months, will be quite a ride.
Joseph Amato is the chief investment officer – equities at Neuberger Berman
