Ahead of the November 2024 United States presidential election, institutional investors have shared their insights on how the stock market will be impacted if either of the two candidates, Donald Trump or Kamala Harris, wins.
Focusing on Vice President Harris, investors have expressed skepticism regarding the stock market’s outlook and foresee volatility, according to a Bloomberg survey conducted from September 9 to 13 among 340 institutional investors.
According to the survey, almost 30% of institutional investors stated that they would likely add equity risk to their portfolios if Harris were to win the election. This suggests that a notable portion of investors would still see opportunities in the stock market under her administration. However, the sentiment is more tempered than with a Trump victory, where 50% of investors said they would increase their equity risk.
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Conversely, a larger portion of respondents — about 40% — indicated they would choose to reduce their equity risk under a Harris presidency. This group likely expects market volatility, leading to a more cautious approach to investing. Another 30% of investors indicated they would do nothing if Harris wins, reflecting uncertainty or a wait-and-see attitude.
Explaining the hesitation behind Harris
The possible impact of Harris’s win on the stock market mainly stems from her proposed policies, specifically the tax plan. Her proposal focuses on increasing taxes for wealthy individuals and corporations while providing relief and benefits for middle-class Americans.
To this end, there are concerns that if these policies are implemented, key players on Wall Street fear the plan will eat into corporate earnings and eventually impact the stock market.
For instance, Yung-Yu Ma of BMO U.S. Wealth Management noted that the tax issue remains a huge concern for investors.
“Tax policy is a huge, huge concern for investors. Tax policy is something that is front and center in this election,” he said.
Similarly, top hedge fund manager John Paulson warned that financial markets will likely crash, and the U.S. would enter a recession if Harris’s tax plans are implemented.
“If Harris is elected, I’d pull my money from the market. <…>. I’d go into cash and I’d go into gold because I think the uncertainty regarding the plans they outlined would create a lot of turbulence in the markets and likely lower them,” Paulson said.
Impact of Harris and Trump tax policies
In this regard, banking giant Goldman Sachs (NYSE: GS) noted that Harris’s proposed 28% corporate tax rate would reduce the earnings of S&P 500 companies by 5%.
On the other hand, the bank noted that Trump’s proposed cut would bolster earnings by 4%. If elected, the Republican presidential candidate intends to lower the corporate income tax rate from 21% to 20% and potentially as low as 15% for domestic manufacturing companies.
In the meantime, investor outlook may shift as Vice President Harris is slated to outline her economic vision in a speech on September 25. Sources privy to the plan indicate that she plans to make it clear that “as a capitalist, she understands the limitations of government.”
In conclusion, the upcoming presidential election is shaping investor sentiment, and those with perceived better policies are likely to see increased voter support.
