All over the world investors are anxiously awaiting the outcome of the US presidential election. But which outcome will be the most beneficial for the stock markets?

The outcome of the US presidential election will significantly affect the course of the stock markets in the coming months, as Kamala Harris and Donald Trump have completely different plans for making economic policy. However, the composition of the House of Representatives and the Senate will also be decisive.

According to the polls, Trump is leading in some of the key swing-states for the election – so are the estimates of the betting companies. At the same time, yields on bond markets have shown a significant increase since the beginning of October, which is linked to the concern of many that the Republican politician is handing out expensive campaign gifts and that because of this inflation may rise again.

Investors are hoping for tax breaks

But Trump still promises to raise tariffs on imported products, as well as to provide significant tax cuts for both businesses and households. And that would be good news for those investing in the US stock market.

“The revival of ‘Reaganomics’ is likely to extend the rally in stocks and the economic cycle through 2025,” said Kevin Thozet, a member of the investment committee of asset manager Carmignc. In the 1980s, President Reagan had tried to stimulate the economy by making major tax cuts. A new Trump term is expected to benefit fossil fuel companies as well, as the former president prioritizes the exploitation of domestic oil and gas production.

The majority in Congress is decisive

Much also depends on whether Trump manages to retain the Republican majority in the House of Representatives, as well as whether he manages to win back the Senate. Should the Republican Party manage to gather a majority in both houses, Trump will be able to truly govern as he pleases. And under these conditions, it would proceed with the imposition of high tariffs, as comments Till Christian Bundelmann, head of investments at Bergos Privatbank. Such a development would have negative consequences for both emerging markets and European stock markets. Currently Trump looks like he can win back the Senate but the House of Representatives will probably go back to the Democrats.

On the other hand, in the event that Kamala Harris wins the election and succeeds in having Congress on her side, experts estimate that there would be a slight decline in American high-risk investments as the mood in the markets would be burdened for fear that the new government will keep corporate taxes at least as high and increase government interventionism. In any case, however, such a comfortable victory for the Democrats seems rather improbable.

Harris ideal for the development of “green” companies

According to Ronald Temple, head of market strategy at US investment bank Lazard, Kamala is likely to win, but will be called upon to govern with a Republican Senate. This would mean that he would not be able to carry out certain reforms – such as increasing corporate taxation.

Given that Democrats favor climate protection, the renewable energy and environmental technology sector would see a big boost if Harris is in the White House, according to Holger Knaup, founder of asset manager Albrecht , Kitta & Co.

Is Trump what the stock market wants?

But is Trump the clearly preferable choice for the stock market? “At first glance one could say that Trump’s more corporate-friendly agenda would be better for the stock market compared to Harris’s,” says Markus Lautenschlager, a portfolio manager at BV & P Vermögen AG. On the other hand, the Democrats seek to strengthen the purchasing power of American citizens through welfare programs and higher wages. And businesses will also benefit significantly from this.

Under President Biden, the US stock market has shown a significant rise: from January 20, 2021 to today the S&P500 index has risen by about 50%. And this happened among other things because after the pandemic and with the war raging in Ukraine, the American government reacted with investment programs worth billions of dollars.

According to Lautenslager, however, one cannot say that the global stock market has an interest in electing one or the other candidate. And that’s because, as different as they are, “both candidates seek to primarily strengthen the US as a business location. And both will take a hard line in negotiations with other trading partners.”

Edited by: Giorgos Passas