Trump Versus Biden: Who Is Better For The U.S. Stock Market?

 

It seems everyone is speculating on which will be better for the U.S. stock market: a re-election of President Donald Trump or an election of former Vice President Joe Biden to the Presidency. While opinions can be heated and often driven by one’s political predilections, in reality, the outcome of the election may not matter all that much to the markets.

Both candidates have presented their economic visions for the future, and both have received positive reviews on their plans. For those willing to hear a few positive things about the ‘other’ candidate, here are a few points on why each candidate can potentially help the stock market move higher in 2021 and beyond:

Donald Trump can be viewed as more favorable because:

The Tax Cut and Jobs Act of 2017  will remain intact under Trump. The Act lowered corporate income taxes to a maximum of 21%, making U.S. corporations more competitive on the global stage. The Act also allowed more certainty for planning and capital investment. For individuals, taxes on dividends and capital gains were unchanged and remained at rates favorable to ordinary income rates. 

Under Trump, the favorable regulatory scheme of the past few years will continue. Reduced regulations mean lower costs for corporations, which can contribute to higher corporate earnings; as earnings ultimately are the biggest driver of stock prices, this may be favorable for the overall stock market.

Trump is less likely to institute widespread COVID-19 shutdowns. While we wait for a viable, widely administered vaccine, and despite the apparent medical benefits of a more cautious health policy for COVID-19, the President has demonstrated that he is more inclined to reopen commerce and keep more activities open. This could have a positive impact on the economy.

Joe Biden can be viewed as more favorable because:

Biden may present less uncertainty and fewer conflicting messages. One hallmark of the Obama–Biden administration was that they stayed on point. Messaging was crisp and consistent. If Biden is elected, many of those same administrative officials will serve prominent roles. Business generally dislikes uncertainty and may welcome the end of Trump's daily, impulsive, and often divisive tweets that do not enhance market clarity.

Biden may offer a more favorable policy towards China. To be sure China has been shown to be an economic threat and a violator of human rights, but the reality is they are the world's second largest economy. As such, we have a relationship of mutual need, and Biden has historically been a bigger fan of China than Trump, who seems to relish threatening China with tariffs and using them as a political prop.

A Biden presidency presumes more government spending. A Biden administration will push hard for spending on infrastructure, state and local government support, green energy programs, and other large-scale government initiatives. At least in the short run, this will stimulate the economy. A Biden administration will be more likely to work with the House of Representatives, where revenue bills start, and where Speaker Nancy Pelosi, who is clearly not a fan of Donald Trump, rules with an iron fist.

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