By Lewis Krauskopf
NEW YORK (Reuters) – Buyers are grappling with the market implications of a attainable Kamala Harris presidential administration, which might stress company income by larger taxes whereas weighing on client staples and boosting photo voltaic vitality.
Harris’ nomination is in focus this week on the Democratic conference after her late entry following President Joe Biden’s withdrawal tightened the race towards Republican candidate Donald Trump.
Buyers’ views on markets are usually formed by elements such because the economic system’s power and the trajectory of rates of interest, however the query of how a Harris White Home might strategy coverage, laws and taxation looms massive.
“She seems to be on a track to be more aggressive than the Biden administration on a lot of these consumer issues that go right to the market,” stated Frank Kelly, senior political strategist at funding agency DWS Group, citing Harris’ latest financial proposals and her document as a U.S. senator and California lawyer common.
On Monday, Harris proposed growing the company tax charge to twenty-eight% from 21%, a plan her marketing campaign characterised as a technique to “guarantee billionaires and large companies pay their fair proportion.”
The plan contrasts with Trump’s record, after he slashed the corporate tax rate to 21% from 35% as president, and as he seeks to make other tax breaks permanent.
A higher tax rate would help reduce the U.S. budget deficit by $1 trillion over the next decade, according to the nonpartisan Committee for a Responsible Federal Budget, addressing an issue that has worried some investors.
Higher taxes could also bite into corporate profits. Each percentage point change in the statutory domestic corporate tax rate should shift earnings by slightly less than 1%, strategists at Goldman Sachs said.
“Anything that reduces earnings should … have a negative impact on the stock market,” stated Peter Tuz, president of Chase Funding Counsel. Nevertheless, “till you see the proposal, there could also be varied offsets.”
Many of the proposals from both candidates would require approval from Congress, which is narrowly divided between Republicans and Democrats. Control of the House of Representatives and Senate will be in contention on Nov. 5.
Harris’ tax proposal could face serious obstacles in a Congress that is divided or under Republican control.
Harris and Trump are locked in a tight presidential race that will likely be decided in a handful of battleground states, polls show. Harris in recent weeks has taken the lead
on the PredictIt politics betting platform.
FOOD, HEALTHCARE, SOLAR STOCKS
Mounting expectations that Trump would beat Biden sparked a so-called Trump trade in U.S. stocks last month, lifting areas of the market seen as benefiting from tax cuts and regulatory easing, including shares of smaller U.S. companies and cryptocurrencies.
Harris outlined a plan last week to ban price gouging on food and groceries, which her campaign says aims to stop big corporations from exploiting consumers.
Harris also is pushing to lower healthcare costs, with analysts expecting she could expand negotiating powers over prescription drug prices enacted during the Biden administration.
Lori Calvasina, head of global equity strategy research at RBC Capital Markets, said in a note this week that the proposals could weigh on consumer staples and healthcare stocks.
Harris also pledged last week to introduce a child tax credit, however, which could lead to a “fairly significant enhance to client spending,” stated Garrett Melson, portfolio strategist at Natixis Funding Managers Options.
Such spending notably may benefit retailers and different consumer-related areas, he stated.
King Lip, chief strategist at BakerAvenue Wealth Administration, expects clean-energy initiatives launched underneath Biden to proceed underneath a Harris administration.
That might provide aid to shares of photo voltaic firms, which have confronted headwinds from elevated U.S. rates of interest, Lip stated. The Invesco Photo voltaic ETF is down over 20% this yr.