The US Candidates – Effect On Financial Markets

03 Nov
US presidential election clinton vs. trump

The US Candidates – Effect On Financial Markets

Donald Trumpthe rank outsider is the Republican Party Nominee. A successful businessman who has made a fortune, lost a fortune, and made it back again. He has proven to be savvy in the calibre of people he surrounds himself. This is evident in his running mate, Mike Pence. Trump is new to politics, but his voice against the current establishment and his ability to use social media has garnered him a very loyal following.

Hillary Clintonthe safe betis the Democrat Party Nominee. When it comes to politics, she has virtually seen it all and, for the most part, been successful in the posts that she has held. She has run a very shrewd campaign and was comfortably in the lead. She has some legal issues which are hanging over her head at the moment. This has made the race a little tighter than one would expect.

Candidates Key Policy Plans

Donald Trump

Trump is advocating cutting the tax rates – both personal income tax and corporate tax rates. He would prefer the highest tax bracket at 25%, and would like to see a substantial amount of households exempt from tax. This would stimulate domestic spending and investment and would no doubt have a major boost on the USD and the equity markets. It is estimated that there is close on $ 2 trillion of corporate profits that are taking advantage of favourable tax reforms overseas. Cutting the corporate tax (almost in half), would be encourage them to leave their operations in the US. This would immediately prop the Equity Indices.

If Trump was to go ahead with these tax cuts, he would have to find a way to compensate for the lack of income.  He has been reluctant to cut social security and Medicare which is probably the biggest slice of the budget pie. By losing control of the national debt, these policies would have a negative effect on the USD.

In my opinion, Trumps biggest short coming thus far has been his reluctance to embrace global trade. His plans to increase tariffs on Mexico and China – key trade partners – could damage foreign relations. This could create a trade war which would also have an effect on the currency.

Hillary Clinton

Traders are uncertain how to interpret Clinton’s stance on the TPP (Trans-Pacific Partnership). It is inevitable that the TPP will have an adverse effect on domestic investment and manufacturing. She was very much in favour of the TPP but changed her stance on it once negations went the other way. This indecisive position means that her trade policies are clouded and would have a negative impact on the markets.

Clinton is in favour of tax hikes and also more regulation on Banks to decrease excessive risk. This hard line approach may be cheered by Main Street but it will have an impact on many companies, which in turn will negatively affect the Equity Market and Indices. She has also proposed tax hikes on the high earners and corporations, whilst the average Joe will be protected from tax hikes. This will create some nerves on the Equity Markets.

Clinton’s biggest challenge will come from acknowledging the real expenses of Government, she is also not the most popular politician which could create a standstill in the government. Oddly enough, this would create a strong sentiment in the equity markets.