Next Tuesday, November 5, the United States will elect either former President Trump or Vice President Harris as the new president of the United States. Based on their policies, let's break down what is likely to happen in each scenario:

 

Vice President Harris gets elected [Democrats]

• Possibility of tax hikes, which would likely weigh on equity valuations
• Continued focus on renewable energy, which should boost renewable energy stocks
• Less likelihood of significant tariffs, which would help businesses with international exposure

 

Pres. Trump gets elected [Republicans]

• Potential for lower corporate taxes, which would benefit small-cap and cyclical industries
• A cutback in regulations, which would likely help financials (banks) and fossil fuel companies
• Possibility of significantly higher tariffs, which would hurt Canada but help domestic US companies with revenue and supply-chain exposure within the US.

 

I've also included a chart below that shows how markets have historically reacted to the different possible outcomes. As you can see from an historical perspective, a Democratic president with a Republican Congress has yielded the highest returns for the market. A Republican president with a Republican Congress has yielded the second-highest. Based on current polling, these scenarios seem to be the two most likely outcomes.

 

 

 

Regardless of the outcome of the upcoming election, strong third-quarter earnings (so far) and monetary easing should provide further upside for equities. As you can see from the next chart below, it's more important to spend time making sure you’re properly diversified and invested in the market than worrying about who gets elected!

 

 

 

I have also included a report from our CIBC Economics team entitled “The morning after”.

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan