In the fourth quarter of this year, the two most significant events affecting the U.S. stock market are the pace of interest rate cuts and the U.S. presidential election. Both of these events will have a direct impact on the future economic data of the United States. The mainstream of U.S. market trading for some time to come is essentially the "recession expectation." Will it be a weak recession or a slow recovery?
In this video, we will examine the policy positions of Trump and Harris on the economy and taxation, and see who will have a better impact on the market in the future.
Let's look at the differences in their policies on the economy and taxation.
Firstly, Trump's policies are more inclusive. He advocates for further reducing the corporate tax rate and proposes measures such as exempting tips and social security benefits from taxes. He has stated that he will reduce the corporate tax rate for companies in the United States from 21% to 15%. At the same time, he hopes to extend the tax cuts from 2017 and make the individual tax relief measures permanent.
Trump's policies tend to support a "small government," reducing government intervention in economic activities, which could attract investment and promote economic growth.
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He also proposed imposing tariffs of 10% to 20% on all imported products, but for China, he wants to impose tariffs of 60%.
He also proposed a measure to establish a sovereign wealth fund, which is usually set up by national governments to invest and manage the country's wealth. He said he would inject income such as tariffs into this fund and use it to invest in advanced manufacturing centers, defense capabilities, and medical research.
On the other hand, Harris proposed supporting an increase in the highest capital gains tax rate. According to the plan, the highest capital gains tax rate may reach 33%, including a new 28% capital gains tax rate and the previously proposed increase from 3.8% to 5% of the investment income tax. By increasing taxes on the wealthy to help stabilize health insurance and social security, and to control federal debt. Harris also proposed policies to reduce the prices of daily necessities such as prescription drugs and to cap the price of insulin at $35.
Another important proposition of Harris is to expand the deduction for startup expenses for small businesses to $50,000. Currently, business owners can deduct up to $5,000 in startup expenses. This proposal would alleviate the economic pressure on startups in their early stages, reduce the barriers to entrepreneurship, and there are 33 million small businesses in the United States. By increasing the tax deduction amount, it can reduce the operating costs of these businesses and ultimately stimulate the economy.Harris also proposed imposing a minimum tax rate on billionaires and tripling the tax on stock buybacks. Increasing the tax on stock buybacks may suppress companies' behavior of repurchasing shares, but it can also encourage companies to invest their money outwardly.
Overall, Trump's policies are more inclined towards tax cuts and reduced government intervention, which are inclusive economic policies. In contrast, Harris's policies focus more on social welfare and wealth redistribution.
Conclusion: Impact
If Trump takes office, his tax-cutting policies might lead to another strong recovery of the US economy. Of course, some people worry that inflation might rise again. However, the impact of economic growth is relatively more significant. So, from the perspective of investment confidence alone, if Trump has a higher chance of winning the election, it might bring a period of strong recovery to the US stock market.
Harris's policy proposals seem more like a continuation of the current situation. They are bearish for large enterprises and the wealthy, bullish for small businesses, and may not have such a significant impact on the overall stock market. The changes in the stock market at that time will depend more on the pace of interest rate cuts.
For traders in the US market, Trump's proposals might be more favorable.
However, if we look back at historical data, since 1952, the average return of the S&P 500 index in election years has been 7%, and the S&P 500 index has never declined in election years. Although elections might bring market uncertainty, the US stock market usually rises in election years.
Moreover, the overall monetary environment will enter an interest rate cut cycle next year, with a continuous loose monetary policy environment. If this can be combined with better economic and tax relief policies, we can actually be more optimistic about the market conditions next year.
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