What Wall Street Really Wants – A Split Decision
First, the market tends to favor a "split decision" with respect to which political party controls the
Most projections suggest the
But we caution that a split decision is not always a panacea, since it may delay progress on important issues, such as addressing the projected deficits in
And The Winner Is … Infrastructure
If there is one common sector or industry that is likely to do well under either candidate, it is infrastructure. Infrastructure includes the repair or building of bridges, roads, tunnels, airports, power grids, communication networks and may even be extended to items such as electronic medical records. Candidate Clinton proposed
The benefits of preventing a crumbling bridge are obvious, but the implications of a stronger and smarter infrastructure may not be quite as apparent. For example, smarter and properly maintained transportation networks may be able to reduce traffic congestion, commuting times and the number of accidents. An enhanced power grid may reduce the likelihood of blackouts and conserve energy. An improved electronic medical records system may improve the quality of healthcare, reduce medical errors and cut insurance payments. Each of these items may result in increased productivity for the economy over a long period of time.
Energy and Healthcare Policies: A Tale of Two Cities
The Presidential candidates have sharply different policies in the Energy and Healthcare sectors. Candidate Clinton favors further progress in the direction of a "green" future for America's energy needs. Solar, renewable energy and natural gas firms may be prime beneficiaries under her energy plan. In contrast, candidate Trump has strongly supported "clean coal" technology as well as conventional oil and gas energy sources. He supports the
Candidate Trump is vehemently opposed to the Affordable Care Act, popularly known as "Obamacare." If elected, he plans to repeal Obamacare, although a full dismantling of the program may be challenging without Congressional approval. Candidate Clinton favors slight modifications to Obamacare and price controls on some pharmaceutical products. She expressed outrage at firms, such as Mylan, maker of the EpiPen, after the firm raised the price on its product more than 450% in less than ten years. Similar large price increases have been observed in pharmaceutical products with little or no competition. Candidate Trump favors competition and market forces as a way of modulating prices as opposed to formal price controls.
In our view, hospitals and health maintenance organizations (HMOs) are likely winners under a Clinton victory, while traditional Pharmaceutical and Biotechnology firms, especially those that produce high priced drugs, are likely losers. The reverse is likely true under a Trump victory.
Some Relief May Be in Sight for the Financial Sector
The Financial Sector has been dramatically impacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which resulted in the largest set of new financial regulations since The Great Depression. Financial firms – primarily the large, national banks – have also been hit with billions of dollars in fines due to misdeeds committed during the period leading up to The Great Recession of 2007-2009. Candidate Trump has stated that he favors repealing the bulk of Dodd- Frank, claiming it makes it nearly impossible for bankers to function.
Candidate Clinton has supported
A (Tax) Holiday May Be on the Horizon … For Corporate America
American corporations labor among the highest tax rates in the industrialized world, with domestic firms generally in a 35% tax bracket. In contrast, other regions, such as
Both candidates have supported a "tax holiday" for cash held overseas, resulting in a temporary tax rate of 15% or less. Candidate Trump has proposed slashing the
Your Income Taxes May Be Going Up… Or Down
Another sharp contrast between the two candidates is in their personal income tax policies. Candidate Trump has proposed a tax cut for virtually all domestic taxpayers. However, his plan may also increase the national debt between
In contrast, candidate Clinton has proposed a tax cut for most low- and middle-income families, but a tax increase for the highest income earners, those earning more than
current rating is 3.79/5
current rating is 3.13/5
Cut taxes for everyone
Increase taxes, especially on high-income earners.
Three - 12%, 25%, 33%. Earlier proposal: 10%, 20%, 25%
Eight - 10%, 15%, 25%, 28%, 33%, 35%, 39.6%, 43.6%
Three - 0%, 15%, 20%
Complex. Long-term gains will be redefined to assets held > 6 years. Tax rates of 0%, 15%, 20% and 24% on long-term. Additional surcharges on some. Higher rates for all if assets held for fewer than 6 years.
Retain and expand. Increase tax rate from 40% to 45%; and add new tax brackets for 50%, 55% and 65% for estates worth more than
Positive 11% (as estimated by the
Negative 1% (as estimated by the
Positive. 5.3 million new jobs (as estimated by the
Negative. 311,000 fewer jobs (as estimated by the
Impact on Government Debt
Impact on Wages
Positive. +6.5% wage growth (as estimated by the
Negative. -0.8% wage growth (as estimated by the
"Clinton vs Trump - Tax Plans Compared." Diffen.com.
International Trade Policies: A Potential "Black Swan" On the Horizon
Another stark contrast in the economic policies of the two candidates is apparent in their views on international trade. In general, both candidates favor a less open policy on international trade, relative to recent Presidential administrations. This could result in "risk-off' investment sentiment that would benefit
Candidate Trump strongly supports repealing the North American Free Trade Agreement (NAFTA), rejects the proposed
In contrast, candidate Clinton has expressed support for
Between a third and half of the profits for S&P 500 firms come from overseas. The stock market, in aggregate, seems to dislike candidate Trump's position on international trade. His policies, if enacted, bring an element of uncertainty to corporate profits, as well as increase the risk of trade wars with foreign countries, most notably with
Political elections are one of the greatest change agents of the American economic system. The contrast between the two Presidential candidates,
But make no mistake, there will be clear winners and losers, beyond the candidates running for office. A summary table on our views is in the Appendix that follows. To some extent, the market has already priced in some of the anticipated movement. For example, Healthcare stocks have lagged the market on a year-to-date basis, and the Mexican Peso has risen versus the
Appendix: Summary Table
If Hillary Clinton Wins…
If Donald Trump Wins…
Low/Middle Income Families
High Income Families
High Income Families
Coal / Oil
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