Investors focused on earnings and monetary policy are now considering the 2024 U.S. presidential race, which might affect markets. In his Thursday State of the Union speech, President Joe Biden proposed boosting corporate taxes, while his Republican opponent, Donald Trump, signed a 2017 measure that cut taxes on companies and the affluent. Biden touted U.S. economic growth under his watch.
It is hard to predict how these plans and others from presidential candidates would affect asset prices in the coming months. The winner may confront a narrowly split Congress that makes legislative reforms tough. Some strategists are still examining how the political outlook may interact with other market drivers. These include optimism over AI's business potential and altering predictions of when the Fed would adjust monetary policy. The S&P 500 (.SPX) is near a record high and up 7.4% year-to-date.
"You get a sense (investors)... have a lot on their plates right now, and politics is starting to come into that," said Wells Fargo Investment Institute global market strategy head Paul Christopher. "Even though everyone knows the candidates, it's going to be a pretty close race so it's very difficult to predict the outcome."
According to polls, Biden, 81, and Trump, 77, are comparable. Despite the U.S. economy outperforming most high-income nations, Americans give Trump better economic ratings in polls. Biden proposed on Thursday to raise the 15% corporate minimum tax on firms with over $1 billion in profit he won in 2022 clean energy legislation to 21%.
He also pledged to revive his "billionaire tax": a 25% minimum income tax on Americans with assets over $100 million. However, "it's going to be difficult for any tax policy proposal to pass by either side because it's going to come down to party lines," said Blue Chip Daily Trend Report chief technical strategist Larry Tentarelli.
According to Wells Fargo analysts, the next administration would likely prioritize fiscal policy regardless of the election. The business added that a Republican sweep would extend the 2017 tax cuts at the expense of inflation, while a Democratic sweep would raise taxes on higher-income people and corporations.
Since World War II, CFRA data shows the S&P 500 has gained 15.5% when a president seeks re-election. The average annual return was 12.8% throughout that time. Election years also include volatility. This month, BofA Global Research said that the Cboe Volatility Index (.VIX), opens new tab, had surged 25% from the second quarter to November in past election years.
The bank raised its S&P 500 objective to 5,400 from 5000. October Cboe Volatility Index (.VIX) futures, which include options contracts until the middle of the following month, were trading 2.6 points higher than September futures, suggesting investor wariness of election-related market swings.
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