Investments - What the US election means

While Kamala Harris advocates for tax reforms, investments in green energy, and affordable housing, Donald Trump’s policy focuses on protectionism, tax cuts, and deregulation. This could significantly impact inflation, trade, taxes, and key sectors such as energy, finance, and infrastructure, particularly if Republicans also hold the Senate majority. Under Trump, the following economic measures could be implemented:

• Trade and Higher Tariffs: Trump plans high tariffs on imports, especially from China. These protectionist measures aim to promote domestic production but could lead to retaliation and higher consumer prices.
• Tax Cuts: Trump wants to extend and possibly expand the 2017 tax cuts, which would benefit households and businesses in the short term but could increase national debt by an estimated $5.8 trillion.
• Deregulation: Trump's policies heavily emphasize reducing regulations, particularly in the financial and energy sectors. While these measures could boost profits in these industries in the short term, they could pose long-term environmental and health risks.
• Restricted Immigration: Stricter immigration policies could reduce the labor supply, raising wages and potentially putting inflationary pressure on the economy.

In contrast, Harris and the Democrats are primarily focused on economic equality and environmental protection. Proposed tax reforms would increase the corporate tax rate to 28% and raise capital gains taxes for high earners to fund essential social programs—measures that could potentially impact corporate profits and investments. With initiatives like affordable housing grants of $25,000 for first-time buyers and tax incentives to build three million new homes, Democrats aim to address the housing shortage. Additionally, massive investments in renewable energy and electric vehicles are intended to create green jobs worldwide. Low-income earners and families would benefit from expanded tax credits, which could reduce income inequality and boost consumption.

Possible Winners Under Trump:

• Energy: Oil and gas companies like Valero Energy and Kinder Morgan could benefit from deregulation.
• Finance: Fewer regulations could benefit banks like JPMorgan Chase.
• Defense: An increased defense budget could benefit companies like Raytheon.
• Cryptocurrencies: A friendlier regulatory stance could foster growth in the cryptocurrency sector, with Trump positioning himself as a supporter.
• Manufacturing: Trump’s focus on domestic production could benefit companies like Caterpillar and Cummins.

Possible Losers Under Trump:

• Engineering, Metalworking, and Basic Metals: These industries could suffer under higher tariffs on imported raw materials, raising production costs and impacting competitiveness in global markets.
• Automotive and Suppliers: Higher tariffs could disrupt global supply chains, increasing costs for parts and materials, potentially driving up vehicle prices and reducing demand.
• Agriculture: During Trump’s first term, the agricultural sector was hit by retaliatory tariffs from countries like China. A return to similar policies could again limit export opportunities and reduce revenues for U.S. farmers.
• Transportation: Higher import costs could reduce demand for transport services as companies scale back due to higher prices.
• Construction: The construction industry could face a labor shortage if strict immigration restrictions are enforced, leading to higher wage costs and project delays.
• Consumer Goods & Retail: Retailers relying on imported products would bear higher costs from increased tariffs, which could be passed on to consumers. This might reduce spending in price-sensitive market segments.
• Technology Sector: The technology sector could suffer from tougher trade policies with China, potentially disrupting supply chains and raising production costs.
• Renewable Energy: A second term under Trump might weaken or dismantle the Inflation Reduction Act, potentially reducing investments in green technologies like wind and solar energy, as well as electric vehicles.

Analysts had anticipated a divided government, with the opposing party controlling at least one chamber of Congress. Now, the Republicans have secured the Senate and the House. Under Trump’s presidency, the following challenges could arise:

• National Debt: Trump’s tax plans could increase national debt, potentially leading to higher interest rates in the long term.
• Labor Market Issues: Strict immigration restrictions could lead to a labor shortage and put inflationary pressure on wages.
• Trade Volatility: Protectionist policies could lead to trade conflicts, particularly with China, and create uncertainty.
• Geopolitical Tensions: Potential conflicts with China, Iran, and Europe could affect global stability and impact markets.

Historically, stock markets have tended to recover under both Democratic and Republican administrations within about three to twelve months. Long-term economic fundamentals like growth, inflation, and interest rates play a more significant role than political changes alone. Here are a few tips on how to prepare your finances for the future: