Survey shows: Kamala Harris’ election victory could trigger stock market crash – but bonds could benefit significantly

While Donald Trump frequently highlights the purported increase in stock prices following his election victory, Democrat Kamala Harris takes a more measured approach to such claims. She instead proposes measures that are unpopular among shareholders, such as raising capital gains taxes, which appears to be having an impact.

• Survey: If Trump wins, stocks could be purchased
• Harris could elevate bond prices
• Wall Street might continue to outpace the DAX, Nikkei, and others

As the U.S. presidential election on November 5th approaches, the topic becomes increasingly significant for players in international stock markets. How will stocks respond to the election results? Which candidate would be more favorable for stock price developments on Wall Street: Kamala Harris or Donald Trump? A survey of investment professionals arrived at a fairly clear conclusion.

How investors might react to the outcome of the U.S. election

According to a survey conducted by Bloomberg Terminal, institutional investors believe a Trump victory would be more advantageous for the stock market. Of the 340 investors questioned, about one-third indicated they would reduce their equity exposure if Harris wins the presidential election. In contrast, half of the respondents plan to increase their equity exposure if Trump wins, compared to just 28 percent for Harris.

The situation differs for bonds; according to the survey, a victory for Harris would lead to increased demand for purchasing bonds. Nearly 50 percent of the investment experts surveyed indicated they would decrease their bond holdings if Trump wins, whereas only 23 percent would make similar adjustments if Harris is victorious. It can be inferred that this represents a planned shift—if Trump wins, many investors are likely to take on more risk. Conversely, if Harris wins, many investors seem to prefer bonds, which are generally viewed as a safer asset class. For instance, Billionaire John Paulson warns of a potential stock market crash if Harris wins the election.

Stock bulls favor Trump

The survey indicates a distinct division in market sentiment regarding stocks and bonds. Investors seem to be bracing for a stronger stock market under Trump, with over a third expressing intentions to increase their equity exposure if he takes office. Conversely, a presidency led by Harris is perceived as more beneficial for bonds, with 50 percent of respondents planning to maintain their bond positions unchanged if she wins the election, compared to just 37 percent under Trump.

These survey findings suggest that stock prices—at least in the short term following the election—are likely to experience a greater increase under Trump, while bond prices are expected to rise under Harris. Evidently, Harris’s significantly more extensive tax proposals compared to Trump’s seem to deter many investors, even though Harris likely will not implement such high taxes after all as previously suggested by Biden. In contrast, Trump generally embodies a business-friendly policy characterized by tax cuts and minimal government interference. Managers and investors apparently believe that this policy direction would positively impact the profit situation of publicly traded companies.

How significant is the president’s influence?

Despite these differences, history indicates that stock prices generally increase regardless of the political leadership in place. Since 1945, the S&P 500 has recorded an average annual return of eleven percent under Democrats and seven percent under Republicans, as stated by “Bloomberg.” However, this performance discrepancy is likely less associated with the party affiliation of the president and more closely tied to macroeconomic factors, such as the Federal Reserve’s monetary policy or the prevailing economic conditions during each presidential term.

Increased debt expected under both presidents

Aside from short-term market fluctuations, the candidates’ fiscal policies raise broader economic concerns. Both Harris and Trump are anticipated to expand federal borrowing. Trump’s proposal to permanently maintain the 2017 tax cuts would elevate the U.S. debt-to-GDP ratio to 142 percent within the next decade, a level that would be “approximately 20 percent higher than at the end of World War II,” according to Bloomberg Economics. Despite apprehensions regarding rising debt, the majority of survey participants remain optimistic that the U.S. will not face a credit downgrade under the ensuing administration.

Will Wall Street continue to dominate European and Asian stock markets?

Overall, surveyed investors exhibit a bullish outlook regarding the future performance of U.S. stock markets. Two-thirds of institutional investors expect U.S. stocks to outperform global markets over the next four years, a sentiment primarily tied to ongoing optimism about technological advancements. Notably, U.S. companies, such as chip giant NVIDIA, are leaders in artificial intelligence, which is a crucial factor behind Wall Street’s sustained outperformance against European and Asian markets for years.

The remarkable surge in NVIDIA’s stock price, which has gained significant weight, has driven major market indices such as the S&P 500 and the NASDAQ Composite in the first half of 2024.

Editorial staff finanzen.net

This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH disclaims any liability for claims made.

While Donald Trump often touts the supposed rise in share prices following his election victory, Democrat Kamala Harris is more cautious with such statements. Instead, she announces measures that are unpopular with shareholders, such as higher capital gains taxes. This seems to be leaving its mark.

• Survey: If Trump wins, stocks could be bought
• Harris could boost bond prices
• Wall Street could continue to outperform DAX, Nikkei & Co.

The Influence of the Upcoming Elections on Market Sentiment

The closer the US presidential election on November 5th comes, the topic becomes more dominant for players on international stock markets. How will the stocks react to the election results? Which president would be better for price development on Wall Street – Kamala Harris or Donald Trump? A survey among investment professionals reached a fairly clear conclusion.

How Investors Could React to the Outcome of the US Election

According to a Bloomberg Terminal survey, institutional investors believe a Trump victory would be more beneficial for the stock market. Of the 340 investors surveyed, about a third would reduce their equity exposure if Harris wins the presidential election. Half of the respondents plan to increase their equity exposure if Trump wins, compared to just 28 percent for Harris.

Conversely, the situation is different regarding bonds. Almost 50 percent of the investment experts surveyed indicated they would reduce their bond holdings under Trump, while only 23 percent would do so if Harris wins. This suggests a planned shift in strategy among investors, as many seek greater risk under Trump while preferring the safety of bonds with a Harris presidency. Concerns from high-profile investors, such as Billionaire John Paulson, hint at a potential stock market crash if Harris wins the election.

Stock Bulls More for Trump

The poll illustrates a clear split in market sentiment regarding stocks and bonds. Investors appear to anticipate that a stronger stock market under Trump will prevail, with over a third planning to increase their equity exposure if he takes office. Conversely, a Harris presidency is perceived as more beneficial for bonds, with 50 percent of respondents planning to maintain their bond positions if she takes office, compared to just 37 percent under Trump.

This suggests that stock prices are likely to rise more markedly under Trump in the short term, while bond prices may increase under Harris. The considerable tax plans proposed by Harris, compared to Trump’s generally business-friendly policies, seem to deter many investors, despite indications that Harris’s tax approach may not be as severe as initially proposed.

How Great is the President’s Influence Really?

Despite these apparent differences, historical data reveal that stocks generally trend upward regardless of political leadership. Since 1945, the S&P 500 has averaged an 11 percent annual return under Democratic presidents and a 7 percent return under Republicans, according to “Bloomberg.” However, this performance gap likely stems more from macroeconomic factors, like Fed monetary policy and prevailing economic conditions, rather than the party affiliation of the president.

Higher Debt Expected Under Both Presidents

On top of short-term market movements, the fiscal policies from both candidates raise broader economic concerns. Both Harris and Trump are expected to contribute to an increase in federal debt. Trump’s proposal to make the 2017 tax cuts permanent could escalate the U.S. debt-to-GDP ratio to 142 percent within a decade, excessing 20 percent compared to the post-World War II levels, as per Bloomberg Economics. Notwithstanding these debt concerns, most survey respondents remain optimistic that the U.S. will avoid a credit downgrade under the next administration.

Will Wall Street Continue to Dominate Global Markets?

The overall sentiment among surveyed investors points toward a bullish outlook for the future of US stock markets. Two-thirds of institutional investors anticipate that US stocks will outshine their global counterparts over the next four years, primarily fueled by optimism regarding continuous technological advancements. Notable companies, such as chip-making giant NVIDIA, hold substantial influence in this respect, being at the forefront of artificial intelligence, which has significantly contributed to Wall Street’s sustained outperformance over European and Asian markets.

The surge in NVIDIA’s stock price, which now has a significant weight in composite indices, has been a driving force for broader market indices like the S&P 500 and the NASDAQ Composite, influencing their trajectory as they move towards half of the year 2024.

Editorial staff finanzen.net

This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.