US Presidential Elections: How Stock Market Will Be Impacted By Harris Vs Trump?

Emkay Global’s Madhavi Arora predicted that a full sweep by Trump will be the most positive outcome for the equity markets due to his supportive corporate tax regime and low regulatory burden

The US Presidential Elections is underway and it is becoming increasingly more competitive. As more and more American voters line up to decide the next President for their country between Donald Trump and Kamala Harris, investors are eagerly awaiting the results.

In a too-close-to-call election, it is evident that markets will feel the impact of the final results and this effect would be felt at the global level.

Emkay Global’s Madhavi Arora predicted that a full sweep by Trump will be the most positive outcome for the equity markets due to his supportive corporate tax regime and low regulatory burden, reported The Economic Times.

However, she pointed out, “Any gridlock is technically equity market-negative. However, the gridlock would be the most bearish outcome for spending, implying good news for bonds. Expect bearish steepening on a full sweep, with higher pressure on term premium in a Red sweep.”

The research firm further elaborated on the four possible outcomes of the US elections and the likely impact these can have on the investors.

A Win For The Republicans

A clean win for the Republicans will turn out to be completely positive for equities in the near term through reduced corporate taxes and easier regulations. Domestically, this result could also trigger a short-term rally in the stock market, the research firm said.

"However, a Nifty rally will depend on valuations and earnings momentum as well and not just the outcome of who becomes the next US President. In the bond markets, a possible delay in deep Fed cuts could spill on US Treasuries and bear flattening may make a comeback,” the estimates of Emkay Research stated.

Victory For Trump With Split Congress

If Donald Trump manages to become President but with a split Congress, the stock markets will be negative in the near-term, the research firm said. This will be a result of the reduced tax concessions, FTA negotiation, possible immigration control, and headwinds from tariffs.

Democrats Get A Clear Win

A sweep for the Democrats will be negative for the US currency in the immediate term, Emkay noted. For equity also, it would turn out to be net negative as a result of higher corporate and personal taxes and more regulation. “A Democrat sweep could trigger nervousness in global equities and leave India somewhat vulnerable. Any major dip should, however, be bought as the core fundamentals for India are likely to be unchanged. IT could be vulnerable in the short term (high valuations, worries over corporate tax hikes) but there is little else from a sectoral perspective,” the brokerage said.

Harris Wins, But Congress Remains Split

A split Congress could result in a rally for US Treasuries and help India bonds rally on global factors. However, the outcome for equities would remain negative due to lower tax concessions. Emkay stated that growth and inflation variability would keep equities unsteady in the medium term.