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According to twenty stock market strategists surveyed via email last week, Joe Biden is predicted to win the U.S. elections.
Their opinions are split over what the results would mean to U.S. stocks. Some argue that despite Trump showing promise for the capital markets during his first term, his trade and immigration limits could hurt the economic output. Meanwhile, the other half stated that the S&P 500 could decline in the first month after election day.
They also said that the reaction to Joe Biden’s taxation policies, which party will rule over the Senate, and how the next President will continue trade relations with China are essential factors. Biden has proposed raising the corporate tax to 28% from its current 21%, setting minimum corporate taxes for domestic and foreign incomes, and restoring top individual tax rate to 39.6%, among many other policies.
The plans have been estimated by the Tax Policy Center (TPC), Penn Wharton Budget Model (PWBM), Tax Foundation (TF), and the American Enterprise Institute (AEI) to raise $3.35 Trillion to $3.67 Trillion, saying that it is a highly progressive plan that will raise taxes for the top 1 percent of earners while only indirectly raising taxes for most of the other groups.
It will cause a moderate slowing down of economic growth and may even affect the labor supply as it discourages work and capital accumulation. How the newly raised revenue will be spent or allocated will dictate the ultimate fiscal, distributional, and economic impact of the policy’s implementation.
As for Chinese relations, if Biden wins, he will have the advantage of quickly bolstering the U.S.’s world position and create a wiser response to the increasing threat of authoritarian Chinese rule. He is expected to take a more moderate approach to deal with the eastern superpower. He might go back to traditional diplomatic negotiations in contrast to a Trump intensified anti-China stance. Although the current administration has significantly increased protection in terms of national security, especially against espionage, highly questionable moves have caused the economy to suffer.
Although most of the strategists are confident of a Biden win, they state that Trump will carry most of the red states, but will meet a decisive loss in Florida. Market players are hesitant over Biden due to his taxation policies, but a comprehensive health crisis response and proposed investments in clean energy and infrastructure could drive away negative sentiments. Additionally, a majority Republican senate could keep him in check.