Still, a Trump victory in this climate would likely lead to further tariffs, which could disrupt trade and raise inflation, hurting “consumer discretionary, industrial and information technology sectors,” according to financial services firm UBS. Trump would likely be successful in cutting taxes and increasing the deficit, stimulating the economy but again stoking inflation and potentially leading to higher interest rates. Regulation would likely be relaxed, benefiting sectors such as fossil fuel energy and financial services.
If Biden is re-elected but Democrats don't control Congress, the status quo will continue, which UBS says could mean more regulation than under Trump (though the Supreme Court limited the executive branch's regulatory powers on Friday), higher taxes on the wealthy and corporations, and executive orders to help “industrial, materials, and utility companies focused on renewable energy and energy efficiency.”
A landslide victory for either party to take control of both the White House and Congress would be unexpected and could roil markets. It could allow Biden to achieve legislative feats that were previously out of reach. It would increase the likelihood of higher taxes on the wealthy and corporations. It would increase the odds of a good outcome for clean energy companies, but banks and fossil fuel companies would face tougher times, Wall Street said.
A landslide victory for Trump would be the most worrying outcome from a purely financial perspective, because he would enact policies that could fundamentally change how business is done and how people live in the U.S. The New York Times has reported on the plans underway for a second Trump administration, but I won't go into the details here.
Anthony Sagrimbene, chief market strategist at Ameriprise Financial, said at a news conference that “the markets are not pricing in” a landslide victory for Trump or a Democratic sweep. “If we wake up on November 6th and see some semblance of one-party control of Congress, we're going to see some volatility,” he added. But he added that markets are likely to bounce back quickly. “Once we get past the election cycle,” he said, markets will return to focusing on interest rates and corporate earnings.
