While Donald Trump often advertises his election victory with supposedly rising stock prices, Democrat Kamala Harris holds back from such statements. Rather, it is announcing measures that are unpopular with shareholders, such as higher capital gains taxes. That seems to leave its mark.
• Survey: If Trump wins the election, shares could be purchased
• Harris could boost bond prices
• Wall Street could continue to outpace DAX, Nikkei & Co
The closer the US presidential election on November 5th gets, the more dominant the topic will become for players on the international stock markets. How will stocks react to the election outcome? Which president would be better for the price development on Wall Street – Kamala Harris or Donald Trump? A survey of investment professionals came to a fairly clear result.
This way investors could rely on the outcome US election react
Institutional investors believe a Trump victory would be more beneficial for the stock market, according to a Bloomberg Terminal survey. Of the 340 investors surveyed, about a third would reduce their equity exposure if Harris wins the presidential election. Half of respondents plan to increase their exposure to stocks if Trump wins, compared to just 28 percent for Harris.
However, the situation is different for bonds – according to the survey, a Harris election victory will lead to higher purchasing demand. Almost 50 percent of the investment experts surveyed would reduce their bond holdings under Trump, while only 23 percent would do the same if Harris wins. It can be assumed that some of this is a planned shift – if Trump wins, many investors will take more risk. In the event of a Harris victory, many of the investors surveyed would appear to prefer bonds and thus the asset class that is generally considered safer. For example, billionaire John Paulson warns of a stock market crash if Harris wins the election.
Stock bulls more for Trump
The survey shows a clear separation in market sentiment towards stocks and bonds. Investors appear to be expecting a stronger stock market under Trump, with more than a third saying they plan to increase their equity exposure if he takes office. Conversely, a Harris presidency is seen as more favorable for bonds, with “50 percent of respondents planning to leave their bond positions unchanged if he wins,” compared to just 37 percent under Trump.
From these survey results it can be concluded that stock prices are likely to rise more strongly under Trump – at least in the short term after the election – while bond prices are likely to be on the rise under Harris. Apparently, the Democratic presidential candidate’s tax plans, which are much more far-reaching than Trump’s, seem to deter many investors – even if Harris is unlikely to introduce taxes as high as those previously demanded by Biden. Trump, on the other hand, generally stands for business-friendly policies, characterized by tax relief and less government intervention. Managers and investors apparently expect that this policy course would have a positive impact on the profit situation of listed companies.
How big is the president’s influence actually?
Despite these differences, history shows that stocks generally rise regardless of political leadership. Since 1945, the S&P 500 has achieved an average annual return of 11 percent among Democrats and 7 percent among Republicans, according to Bloomberg. However, this difference in performance is probably less related to the president’s party affiliation. Rather, this can be mainly caused by macroeconomic factors such as: monetary policy the Fed or the economic situation during the respective presidential term.
Higher debt expected for both presidents
Aside from short-term market moves, the candidates’ financial policies also raise broader economic concerns. Both Harris and Trump are expected to expand federal borrowing. Trump’s plan to permanently extend the 2017 tax cuts would increase the U.S. debt-to-GDP ratio to 142 percent of GDP within the next decade. That level would be “about 20 percent higher than at the end of World War II,” according to Bloomberg Economics. Despite concerns about rising debt, the majority of survey respondents remain confident that the U.S. will avoid a credit rating downgrade under the next administration.
Will Wall Street continue to outpace Europe and Asia’s stock markets?
In general, there is a bullish sentiment among the investors surveyed regarding the further development of the US stock markets. Two-thirds of institutional investors expect U.S. stocks to outperform global markets over the next four years. This is mainly attributed to the continued optimism regarding technological advances. In fact, US companies such as chip giant NVIDIA are global leaders in artificial intelligence, which is an important factor in Wall Street’s consistent outperformance of European and Asian markets for years.
The impressive price increase of the now heavily weighted NVIDIA securities decisively boosted broad market indices such as the S&P 500 and the NASDAQ Composite in the first half of 2024.
Editorial team finanzen.net
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