Investors are evaluating the potential market implications of a Kamala Harris presidency, which could result in higher corporate taxes, impact consumer staples, and boost the solar energy sector.
What Happened: The possibility of a Harris administration is a key focus at the Democratic convention this week. This comes after her late entry into the race following President Joe Biden's withdrawal, which has intensified the competition against Republican candidate Donald Trump.
Investors are considering the potential policy, regulatory, and taxation changes that could occur under a Harris administration, Reuters reported on Wednesday. Frank Kelly, senior political strategist at DWS Group, noted that Harris appears to be "more aggressive than Biden" on consumer issues that directly impact the market.
On Monday, Harris proposed increasing the corporate tax rate to 28% from 21%, a move her campaign says will ensure billionaires and big corporations pay their fair share. This proposal contrasts with Trump's record of reducing the corporate tax rate to 21% from 35%.
A higher tax rate could help reduce the U.S. budget deficit by $1 trillion over the next decade, according to the nonpartisan Committee for a Responsible Federal Budget. However, it could also impact corporate profits. Goldman Sachs strategists estimate that each percentage point change in the corporate tax rate could shift S&P 500 earnings by slightly less than 1%.
Peter Tuz, president of Chase Investment Counsel, said, "Anything that reduces earnings should... have a negative impact on the stock market."
However, he added that there might be different offsets in the proposal.
Both Harris and Trump's proposals would require congressional approval. The control of the House of Representatives and Senate will be contested on Nov. 5. Harris' tax proposal could face significant hurdles in a divided Congress or one under Republican control.
Why It Matters: According to a Benzinga poll, 42% of Americans trust Harris more to handle the economy, compared to 41% for Trump. This shift in public sentiment followed Biden's withdrawal from the 2024 presidential race.
However, Harris's economic proposals have sparked significant debate. Former Trump administration economist Kevin Hassett called Harris' proposals "chilling" and likened them to "communism plain and simple."
Harris has also outlined plans to ban price gouging on food and groceries, lower healthcare costs, and introduce a child tax credit. These proposals could impact consumer staples, healthcare stocks, and consumer spending, respectively.
Furthermore, clean-energy initiatives launched under the Biden administration are expected to continue under the Harris administration, potentially offering relief to solar companies.
