Harris Vs Trump – what their policies mean for your portfolio

Harris policy

“Vice President Kamala Harris has made clear that building-up the middle class will be a defining goal of her presidency. That’s why she will make it a top priority to bring down costs and increase economic security for all Americans.” ^[1]

Harris's economic platform is wide-ranging but with a clear focus on the working and middle classes. It includes tax breaks for small businesses, reform for housing, and proposals to make healthcare more affordable.

Her platform promises to fund these changes through higher taxes on corporations and higher earners.

In the event of a Harris victory, we might expect to see the following sectors benefit:

Kamala Harris’s fiscal policies favour households over corporations. Her plan to raise corporate taxes while providing relief to middle-class families could weigh on markets, as higher taxes would pose challenges for US companies.

Trump policy 

“America needs determined Republican leadership at every level of Government to address the core threats to our very survival: Our disastrously open border, our weakened economy, crippling restrictions on American energy production, our depleted military, attacks on the American system of justice, and much more”. ^[2]

Donald Trump's platform is a reiteration of his 2016 campaign, doubling down on his promise to ‘Make America Great Again’ and put the US ‘first’. He argues that he will reduce inflation by cutting back regulation on fossil fuel sectors and implementing tax cuts. In the event of a Trump victory, we might expect to see the following sectors benefit: 

While Trump does not have the scope to bring through another significant cut to corporate taxes (as he did in 2016), he is promising to make those cuts permanent, which would be generally positive for markets. In addition, Trump’s promise to bring in tariffs on all US imports will benefit domestically-focussed stocks and sectors – typically smaller- and medium-sized companies. 

On the flip side, the potential inflationary pressures that could develop from trade tariffs alongside more stimulative fiscal policy brings into question the trajectory for inflation and interest rates, thus likely to create volatility in government bonds. Despite the positive impacts from extended tax cuts for US equities, companies and regions with a greater reliance on global trade or manufacturing could see continued headwinds.

Expected outcome

While the race for the Oval Office is too close to call, it is important not to forget the power wielded by the US Congress. It has two chambers: the House of Representatives (currently controlled by the Republicans) controls fiscal policy and approves spending plans, and the Senate (currently controlled by the Democrats) votes on things like key government appointments.

Projections show it is possible for either chamber to be flipped in the 5 November vote, which adds further complexity to predicting post-election policy.

And there is always the possibility of an ‘October Surprise’ – an unexpected global event occurring in the last few weeks leading up to polling day that moves the dial on sentiment for either candidate.  

What this means for your portfolio

In the run-up to election, it is common to see a decline in trading volumes as many investors adopt a ‘wait and see’ approach. This environment often heightens volatility in the weeks and months preceding the election, as market movements become less cushioned by liquidity.

When the election results are announced, expect short-term price adjustments in sectors poised to perform better or worse under the incoming administration. These movements can offer brief opportunities for investors.

With almost half the world’s population having been to the polls across the globe in 2024, we have previously written a more detailed guide to the impact of elections on markets here.

In the absence of an ‘October Surprise’ and without conviction on the election outcome it would be ill advised to rotate a portfolio based on a hunch of a Harris or Trump victory. If the call is wrong, it could be costly.  

Our approach at Arbuthnot Latham is to remain objective. We base our investment decisions on data, rather than on emotion or speculation. We keep a keen eye on markets, trends and, when it comes to elections, the polls. We discuss and debate multiple scenarios and are poised to respond if we see an opportunity for our clients’ portfolios that we can act on.

Above all, despite uncertainty caused from elections, we firmly believe that the direction of the global economy will be the more powerful and overriding force for financial assets which we continue to monitor closely to guide the allocation of our clients’ portfolios.