The 2024 U.S. Presidential Race: Key Developments and Investor Insights
The 2024 U.S. Presidential race has been nothing if not eventful. President Joe Biden’s decision not to seek re-election set the stage for a heated contest between Democratic Vice President Kamala Harris and Republican former President Donald Trump. With the election less than a month away, the race is tight, especially in battleground states where polls show neither candidate has a clear edge. These key states could ultimately decide the outcome as they carry significant electoral college weight.
Biden’s Exit and Its Implications
Biden stepping aside has fundamentally altered the election dynamics. Rob Haworth, senior investment strategy director for U.S. Bank Wealth Management, notes, “This is no longer an election that is directly a referendum on an incumbent.” With Biden stepping down, market uncertainty tied to incumbency has shifted to anticipating a new President—either Vice President Harris or former President Trump—come January 2025.
Beyond the Presidential race, Biden’s departure impacts Congressional elections. One-third of Senate seats (currently narrowly controlled by Democrats) and all 435 House seats (held by a slim Republican majority) are also up for grabs. The outcome could lead to unified control by either party or a continuation of a divided government, which will significantly affect future policymaking.
Policy Changes on the Horizon
With the campaigns heating up, both candidates are beginning to clarify their platforms, particularly on key economic and tax policies.
Trump is focusing on reducing corporate tax rates, proposing a cut from 21% to 15% for companies manufacturing within the United States. He also aims to revive some of the tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA). If these provisions aren’t extended, tax rates for individuals and corporations could increase, making tax policy a crucial aspect of the election.
Harris, in contrast, is focused on supporting middle-class families with expanded child tax credits, a $50,000 tax deduction for small business startup expenses, and a 28% capital gains tax for households earning over $1 million—lower than the 39.6% rate proposed by Biden previously. Both candidates support eliminating taxes on tips for hospitality and service workers, appealing to working-class voters.
The market's current focus is largely on Federal Reserve policy and economic conditions, but as election day nears, these evolving policy positions could have a significant impact on investor sentiment.
Sector-Level Impact: Potential Winners and Losers
Depending on who wins, policy direction could significantly benefit or hurt specific industries.
“If Republicans win, there is likely to be more of a push for fossil fuel development, while a Democratic win might further promote renewable energy,” says Haworth. Interestingly, renewable energy stocks performed better under Trump, while traditional energy stocks fared well under Biden—showing that market outcomes don’t always align with expectations.
Beyond energy, other sectors like healthcare, infrastructure, and technology could also see major impacts depending on the winning party's policy priorities. Both candidates will likely influence government spending and regulation, affecting industries differently.
Election Outcomes and Historical Market Impact
U.S. Bank investment strategists reviewed market data from the past 75 years and found that Presidential elections typically have a limited impact on long-term market performance. Instead, factors such as economic growth and inflation tend to play a larger role.
Interestingly, the data showed that a divided government often led to more stable markets. For instance, when Democrats controlled the White House and Republicans held Congress, market returns exceeded long-term averages. Conversely, full control by either party didn’t necessarily lead to more significant market shifts.
The policy priorities of each candidate can provide insight into potential industry-level effects, while the historical record suggests that overall market changes are less influenced by which party is in power.
Final Thoughts
The 2024 Presidential election is shaping up to be a highly unpredictable and intense race. The outcome could lead to changes in economic policies, tax rates, and government spending, which may have varying impacts across different industries. Historical data shows that economic growth, inflation, and sector-specific policies have typically played a larger role in market performance than election outcomes alone. With both Harris and Trump offering different approaches, the upcoming election will have significant implications for policymaking, industry-level impacts, and the direction of the U.S. economy.
