This article highlights some of the potential industry implications of the U.S. presidential candidates’ policies.
We are not attempting to endorse a candidate. We are outlining the potential market impacts of the candidates’ proposed policies. The sources for information on candidate policies in this report include www.whitehouse.gov and www.donaldjtrump.com (President Donald Trump) and joebiden.com (Former Vice President Joe Biden), as well as taxfoundation.org.
Major Policy Differences
Taxes, regulation, energy, and climate change top the list of major differences between Trump and Biden policies. They are more in agreement on infrastructure and drug-price controls. The ability of Biden to implement many major policy initiatives would
require Democrats to gain control of the Senate, which is discussed below.
Taxes and Regulation
Trump’s signature legislative achievement was 2017’s tax reform, which lowered the corporate tax rate to 21% from 35%. This was a significant boost to corporate profitability and was market friendly. Biden’s plan would raise corporate
taxes, increase minimum taxes on low-tax multinationals, and increase taxes on investment income. Trump has significantly reduced regulation while Biden’s plan would increase regulation. Technology, financials, and small companies (with limited
resources) were all big beneficiaries of Trump’s market-friendly tax and regulatory environment that would be most impacted by the potential reversal of these policies.
Energy and Climate Change
The oil and gas industry was a major beneficiary of Trump’s deregulation. Biden has made climate change a major theme, which would benefit alternative energy including wind, solar, and electric vehicles. Biden’s climate change initiatives
would come at the expense of the oil and gas industry.
While both candidates favor drug-price controls, price-control legislation is more likely the better the Democrats do in the election. This is a risk for the pharmaceutical and biotechnology industries. While a Trump and Republican sweep of Congress is
unlikely, the Affordable Care Act could be at risk. This would be negative for hospitals and Medicaid HMOs.
Both candidates’ proposals include major spending on infrastructure. While major infrastructure spending would benefit traditional construction and material stocks, technology stocks that are building advanced communication systems would benefit.
While China trade risks are not low under Biden, they are higher should Trump win re-election. While higher tariffs disproportionately hurt China, they also hurt U.S. multinationals with significant Chinese sales if China retaliates. Higher tariffs would also impose higher costs on retail goods, which is to the detriment of the U.S. consumer and retailing industry.
While big tech companies are currently under fire from Trump and Congress, Biden would be more likely to pursue aggressive antitrust measures. Democrats have pledged to target companies that do not pay much in taxes. The Technology sector has been able
to reduce its tax bill through its major global presence and has the most at risk for potential tax changes on foreign profits.
Trump made rebuilding America’s defense a theme in his 2016 campaign and he followed through with a major increase in the size of the Pentagon budget—to the benefit of the defense stocks. It could get bigger if he wins. Democrats would grow
defense more slowly than Trump and perhaps even accede to progressive demands to cut it.
Importance of Senate Control
The Democrats currently hold the majority in the House of Representatives, while the Republicans control the Senate. For Biden, winning control of the Senate while keeping the House is important for implementing major changes—especially for his
tax agenda, climate change, and infrastructure plans. Using Executive orders, Trump was able to significantly reduce regulation without congressional approval. Biden could reverse many Trump policies using the same.
If Republicans remain in the majority in the Senate, legislative efforts will likely remain status quo. Some items that could be on the agenda are infrastructure, actions against China, drug pricing, and bilateral free trade agreements. Many of these
issues have bipartisan support. If President Trump wins re-election, he could be more willing to work with Democrats in various policy areas like drug pricing or infrastructure, since he will no longer need to consider winning another election and
might focus on his presidential legacy.
If Biden and the Democrats win the majority in the Senate and keep the House, it is likely they will attempt to push through ambitious, long-held priorities. This would be similar to the passage of the Dodd-Frank Act and the Affordable Care Act shortly after former President Obama took office and the passage of a comprehensive tax reform package early in the Trump presidency. In both cases, the same political party as the president held the majority in both chambers. Some economic-related issues that Democrats could focus on include climate change, changing provisions from 2017’s tax reform law, health care reforms, tech regulation, labor and union protections, and infrastructure with a focus on 5G and green energy.
Comparison of Biden and Trump Policy Agendas
Issue or Sector
Taxation and Regulation
Raise corporate tax rate to 28% (reversing half the Trump cut from 35% to 21%).
Trump’s major legislative achievement was reducing the corporate tax rate from 35% to 21%.
Biden has made climate change a major theme. If Democrats sweep, subsidies for electric vehicles, solar and wind are likely to go up substantially.
The traditional oil & gas industry is a major beneficiary of Trump’s energy policies. Under Democrats, energy MLPs are at risk to adverse tax and regulatory changes.
$1.3-trillion infrastructure plan:
|$1-trillion infrastructure plan: |
Democrats are generally supportive of increased regulation, increased scrutiny of industry consolidation, and additional regulation of non-banking sectors (e.g., private equity). Would likely reverse many Trump-era rulemakings.
Financials were big beneficiaries of the Trump tax cut and more laissez-faire regulatory approach. Health Care Drug-price control legislation is more likely the better Democrats do.
Drug-price control legislation is more likely the better Democrats do.
Trump supports drug-price controls, but not as much as Democrats.
Supports antitrust investigations of large technology companies (stops short of stating he would break up these companies).
Supports removing protection for certain social media companies, which exempts them from legal liability for the material posted on their site.
Would continue antitrust probes into the largest technology companies.
Supports federal privacy legislation.
Democrats would grow defense more slowly than Trump and perhaps even accede to progressive demands to cut it.
Trump made rebuilding America’s defense a theme in his 2016 campaign and he followed through with a major increase in the size of the Pentagon budget. It could get bigger if he wins.
Take aggressive trade enforcement actions, in partnership with allies, against China or any other country for unfair practices.
Would continue major efforts to restructure trade with China.
Sources: Janney ISG, Cornerstone Macro, Credit Suisse, Tax Foundation, Biden Campaign, White House
The political process is fluid and some of the often-mentioned impacts could change as the campaigns continue to release revised plans. We will provide further updates as this election season unfolds.
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