This year’s presidential election has certainly captured the world’s attention with the two most disliked candidates in history battling it out to become commander in chief. Both Hillary Clinton and Donald Trump have said and done some cringeworthy things so far this election cycle, but the fact remains that one of them will be heading to the White House come November.
Although most can agree that neither is an ideal candidate for the presidential election, there is some debate regarding who will be better for markets.
Three Ways Clinton and Trump Polices Would Affect Markets
Tax Plans
If Trump is the winner of the presidential election, his policies will likely support corporate America by allowing big-name firms to repatriate their overseas cash without paying the 35% tax rate that the current system requires.
Donald Trump claims that his experience as a businessman makes him an ideal Presidential candidate because he understands the tax code better than most and he will be able to close loopholes, simplify the process and ensure that U.S. businesses are paying a reasonable amount of tax. He has promised to lower corporate taxes and he may even enact a tax holiday in which companies like Apple Inc. (NASDAQ:AAPL) can bring their overseas earnings back to the U.S. tax free.
Clinton, on the other hand, may affect big businesses negatively with her policies. She has vowed to reform the pharmaceutical industry after accusing firms like Mylan NV (NASDAQ:MYL) of price gouging and her stance on climate change will be problematic for energy companies. Under Hillary, U.S. businesses aren’t expected to get much of a tax break and she’s likely to impose tougher regulations in both the energy and pharmaceutical sectors.
Trade
However, Clinton’s plans for America’s international trade deals are much more favorable for markets than Trump’s. While Trump has said he believes that the U.S. should end its involvement in the World Trade Organization and dislikes the idea of the Trans-Pacific Partnership, Hillary Clinton has been more open to maintaining international trade relations.
Both candidates say there are problems with trade deals like the TPP and the North American Free Trade Agreement, but Hillary’s approach to dealing with these issues is much milder. She wants to continue with the trade agreements, perhaps making some amendments. Donald Trump, on the other hand, appears to want to scrap them all together, though his exact plans have been foggy.
International Relations
It’s no secret that the majority of foreign leaders are rooting for Clinton. Trump’s showmanship and unpredictability could lead to an international relations disaster. This could be detrimental to U.S. firms as his plans to tax foreign goods and withdraw from trade agreements may cause some retaliation from foreign governments.
This would be bad for U.S. multinationals that depend on foreign markets for a great deal of their revenue.
The Bottom Line on Hillary Clinton vs. Donald Trump
Markets are cheering for Hillary Clinton to win the presidential election. Despite the fact that her policies will probably be tougher on big businesses, she represents stability and that is the single most important factor in keeping the market afloat.
The first presidential debate captured this sentiment as stocks saw a lift after Clinton was perceived as the winner. While Trump has been able to gain support by presenting himself as a change from the run-of-the-mill politicians that have angered the public, the uncertainty that comes with a Trump administration will probably outweigh any positive effects that his policies might have on the market.
As of this writing, Laura Hoy was long AAPL.
