The election race is heating up, with many political Pundits predicting a win for Donald Trump, especially as his popularity surged after the assassination attempt. To the chagrin of Harris supporters, choosing J.D. Vance as his running mate has strengthened Trump’s position, even winning over more millennial voters.
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While Trump’s position appears to strengthen, Kamala Harris is building undeniable momentum. Regardless of your political choice, your individual economic decisions will have the greatest impact on your finances. Understanding the market impacts of either candidate can help you better position your portfolio and prepare for the next four years and beyond.
Betting markets give Trump a 66% chance of winning, although these are notoriously unreliable. But it still means investors are starting to adjust their positions. Some investors are considering a “Trump trade” scenario. According to various reports, Trump has made several attempts to appease centrist Wall Street big businesses.
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Trump tried to assure investors that new tariffs would not cause inflation, but he failed to explain how he'd work that magic. He also suggested he'd consider JPMorgan Chase CEO Jamie Dimon for Treasury Secretary, which would put Wall Street’s eminence in a strong power position.
On the plus side for the economy, a Trump win and a GOP win in both houses of Congress could open the door for reduced corporate taxes. Trump has famously promised young voters that he will end government efforts to regulate crypto. That’s a positive for markets and the broader economy.
However, the overall outlook for a second-term Trump presidency is far from rosy, with some significant economic downsides. For example, Trump's hard-line stance on import tariffs and undocumented immigrants could raise the prices of imported goods while simultaneously boosting domestic labor costs, making workers in some industries more scarce. While pro-America in theory, both stances could harm the economy long-term.
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Since 2022, inflation has fallen sharply from its peak, with many financial experts hoping that the Federal Reserve could start cutting interest rates as soon as September. The Trump policies above could undo that progress and more.
Numerous other industries could falter under a Trump presidency. Citi warned of bearish oil markets under Trump. Trump’s recent statements during a Bloomberg interview suggested that he wouldn’t aid Taiwan in case of a Chinese attack. That could have disastrous effects on the U.S. economy and millions of jobs. Taiwan is a key source of the world's most advanced semiconductors, which are fundamental to the tech industry and artificial intelligence boom.
While Trump’s prospects have improved and hold firm, the situation remains fluid. Markets may continue to react to new developments in the presidential race. Trump’s upcoming sentencing in a New York City fraud trial, plus Inflationary pressures from proposed policies, could erode his lead or turn the tide.
Rather than trying to predict political outcomes, most investors’ best position is a broadly diversified portfolio across asset classes and investment types. Aim to save, invest, and maximize tax-advantaged accounts to build your future regardless of the political winds.
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