2024 US election: Potential implications for portfolios 

As the U.S. elections approach on November 5, the political landscape is marked by significant uncertainty, with both the presidential and congressional races appearing highly competitive. Opinion polls suggest a closely contested election between Vice President Kamala Harris and former President Donald Trump. This memorandum provides an analysis of the latest polling data, focusing on the presidential race and assessing the potential policy measures that may have material implications for financial markets, depending on the election outcome.

Polling data suggests an extremely close race for the presidency. Although Vice President Harris is currently leading in the popular vote, the Electoral College, which ultimately determines the presidency, presents a different picture. Harris is projected to have 226 electoral votes in states categorized as "safe" or "lean," while former President Trump is projected to secure 219 votes in similar categories. Both candidates must reach 270 electoral votes to secure the presidency. The outcome of the election is likely to hinge on several key swing states, notably Wisconsin, Michigan, and Pennsylvania, with Pennsylvania being particularly pivotal due to its substantial electoral vote count. A loss in Pennsylvania could significantly weaken the chances of victory for either candidate.

The races for both the Senate and the House of Representatives are equally competitive, with opinion polls suggesting that either a "red wave" (Republican control of the presidency, Senate, and House) or a "blue wave" (Democratic control) remain plausible. A red wave is somewhat more likely given the number of Democratic Senate seats that are considered vulnerable. Control of Congress is crucial for the next administration, as it directly impacts the legislative environment and the ability to pass significant policy reforms. Even with control of both chambers of Congress, however, intra-party dynamics and procedural constraints could temper the enactment of sweeping legislation.

The policy platforms of the two major candidates present stark contrasts, particularly in the areas of taxation, regulation, and trade, which could have varying consequences for the broader economy and financial markets.

Vice President Harris has articulated plans to expand social service programs, cancel additional student loan debt, and pursue reductions in drug prices. These initiatives are complemented by proposed tax increases on corporate, individual, and capital gains income. While these tax measures may reduce household disposable income, the associated spending on social programs may help offset some of the potential economic drag.

In the near term, the market impact of Harris's policies is expected to be modest as they represent a continuation of the current administration’s policies. Her trade stance, which includes maintaining tariffs on Chinese goods and possibly raising tariffs on strategic sectors, could marginally increase inflation but is unlikely to result in significant economic or market impact.

Former President Trump’s platform, by contrast, features more aggressive and potentially market-moving proposals. His plans include reducing corporate taxes, potentially to as low as 15%, which would likely provide a substantial boost to corporate earnings and equity markets. Additionally, his regulatory approach is expected to be more lenient, further supporting business interests and potentially stimulating economic growth.

However, his stance on trade, particularly his proposal to impose additional tariffs on imports from China and other countries, could lead to higher inflation, slower economic growth, and diminished business confidence. These protectionist measures, while intended to bolster domestic industries, may strengthen the U.S. dollar, undermining the competitive advantages that the tariffs are designed to achieve. Trump's desire to exert more influence over the Federal Reserve also poses a potential risk to market confidence, particularly if such actions were perceived to threaten the central bank's independence.